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CA Intermediate · Advanced Accounting · AS 25 Interim Financial Reporting

Rohan Steel Ltd. changes an accounting policy in the third quarter of the year, and the change is required to be applied retrospectively. Under AS 25, how should the change be reflected in the interim financial reports?

The prior interim periods of the current financial year are restated to reflect the new policy. AS 25 requires a change in accounting policy to be applied consistently across the year, so earlier quarters are restated and comparable interim periods of earlier years are restated where practicable.

  1. ARestate the prior interim periods of the current financial year so that the new policy is applied to the whole yearCorrect
  2. BApply the new policy only from the third quarter, leaving earlier quarters unchanged
  3. CIgnore the change until the annual financial statements are finalised
  4. DAdjust the opening reserves of the next financial year only

Explanation

AS 25 requires that a change in accounting policy within the year be reflected by restating the prior interim periods of the current financial year, and comparable interim periods of prior years where practicable. Applying it from Q3 only creates inconsistency between periods.

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