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ACCA Strategic Professional · Strategic Business Reporting (International) · Discussion of issues in financial reporting

Zeta plc reports under IFRS Accounting Standards. A transaction is not specifically addressed by any IFRS Accounting Standard. In accordance with IAS 8, what must management do first when developing an accounting policy?

Management should use judgement and first look to IFRS requirements on similar and related issues, then the Conceptual Framework's definitions and recognition criteria. Other standard setters' guidance, such as US GAAP, may be considered only afterwards, and industry practice is not the primary source.

  1. AApply the most recent US GAAP guidance on the matter
  2. BUse judgement, first considering IFRS requirements dealing with similar and related issues, then the Conceptual Framework definitions and recognition criteriaCorrect
  3. CDisclose the transaction in the notes only and not recognise it
  4. DApply the treatment used by the majority of local competitors

Explanation

IAS 8 requires management to use judgement to develop a policy giving relevant and reliable information. It must first consider standards dealing with similar issues, then the Conceptual Framework. Only after that may it consider other standard setters' pronouncements that use a similar framework, so US GAAP is not the first step.

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