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

Kavya Foods Ltd states that its inventory is valued using the weighted average cost formula and that its plant is depreciated on the straight-line basis. Under Ind AS 8, these statements describe the entity's

They are accounting policies. Ind AS 8 defines accounting policies as the specific principles, bases, conventions, rules and practices applied in preparing and presenting financial statements, and a cost formula or depreciation method is exactly such a basis. A monetary figure like useful life would be an estimate instead.

  1. Aaccounting policies, being specific bases and practices applied in preparing financial statementsCorrect
  2. Baccounting estimates, being monetary amounts subject to measurement uncertainty
  3. Cprior period errors, being omissions in earlier statements
  4. DIndian Accounting Standards, being prescribed under Section 133

Explanation

Weighted average cost and straight-line depreciation are specific bases and practices applied in preparing financial statements, which is the definition of accounting policies. An estimate would be a monetary amount such as the useful life or residual value figure. Nothing in the facts suggests an error.

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