On 12 September 2017, the IASB published an exposure draft offering clarifications of the concepts of accounting policy and accounting estimates defined in IAS 8.
Keywords: Mazars, Thailand, IFRS, IASB, IAS 8, FIFO
30 November 2017
The distinction between the two concepts is important, insofar as they do not have the same accounting consequences. A change in accounting policy does not generally have an impact on net income, unlike a change in accounting estimate.
These clarifications relate to the following aspects:
- Explanations of the link between the two concepts, with a succinct definition of an accounting policy, and clarifying that accounting estimates are used in applying an accounting policy;
- Clarifying that selecting an estimation technique, or valuation technique, used when an item in the financial statements cannot be measured with precision, constitutes making an accounting estimate; and that
- Selecting the first-in, first-out (FIFO) cost formula or the weighted average cost formula for interchangeable inventories constitutes selecting an accounting policy.
Comments should be sent to the IASB before 15 January 2018. The exposure draft can be consulted on the IFRS website.