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CA Final · Financial Reporting · Ind AS 8 Accounting Policies, Changes in Accounting Estimates and Errors

Kaveri Pharma Ltd reviews its year-end balances. Management lists: (i) the allowance for expected obsolescence of slow-moving stock, (ii) the fair value of an unquoted investment, and (iii) the sales figure reported for the year. Which of these is an accounting estimate as defined in Ind AS 8?

The obsolescence allowance and the unquoted investment's fair value are accounting estimates, because Ind AS 8 defines estimates as monetary amounts in financial statements subject to measurement uncertainty. Both depend on uncertain inputs. The reported sales figure is a recorded amount without that uncertainty, so it does not qualify.

  1. AOnly (iii), because it is a monetary amount in the financial statements
  2. BOnly (i), because only inventory allowances involve judgement
  3. C(i) and (ii), because they are monetary amounts subject to measurement uncertaintyCorrect
  4. DNone, because estimates are defined as principles prescribed under Section 133

Explanation

Ind AS 8 defines accounting estimates as monetary amounts in financial statements that are subject to measurement uncertainty. The obsolescence allowance and the unquoted investment fair value both depend on uncertain inputs. A recorded sales figure is not subject to measurement uncertainty in the same way. Linking estimates to Section 133 confuses them with the definition of Ind AS.

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