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CMA Final · Corporate Financial Reporting · Accounting Policies, Changes in Accounting Estimates and Errors (Ind AS 8)

Kaveri Foods Ltd's finance head says: 'An accounting estimate is a policy choice made by management to decide how items are measured.' Under the definitions in Ind AS 8, which statement is correct?

The statement is incorrect. Ind AS 8 defines accounting estimates as monetary amounts in financial statements that are subject to measurement uncertainty, whereas accounting policies are the principles, bases, conventions, rules and practices applied. Estimates are amounts, not policy choices, so the two concepts are distinct.

  1. AThe statement is correct because estimates and policies are the same thing
  2. BThe statement is incorrect because accounting estimates are monetary amounts in financial statements that are subject to measurement uncertaintyCorrect
  3. CThe statement is incorrect because estimates are principles prescribed under Section 133 of the Companies Act, 2013
  4. DThe statement is correct because estimates are conventions applied in presenting financial statements

Explanation

Ind AS 8 defines accounting estimates as monetary amounts in financial statements subject to measurement uncertainty. A policy is a principle, basis, convention, rule or practice. The two are distinct, and the section 133 reference relates to Ind AS as a whole.

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