Disclosure Initiative - Changes in accounting policies and estimates – IASB

Date recorded:

At its meeting on October 23, 2019, the IASB discussed the feedback on its Exposure Draft and the project direction. The Board tentatively decided to revise the definition of accounting estimates to specify that:

  1. accounting estimates are monetary amounts in financial statements that are subject to measurement uncertainty;
  2. such monetary amounts are outputs of measurement techniques used in applying accounting policies; and
  3. an entity uses judgements and/or assumptions in developing an accounting estimate.

The Board also tentatively decided to:

  1. clarify that: (i) the effects of a change in an input and/or in a measurement technique used to develop an accounting estimate are changes in accounting estimates if they do not result from the correction of prior period errors; and (ii) a change in accounting estimate that results from new information or new developments is not the correction of an error; and
  2. specify that estimation techniques and valuation techniques are examples of measurement techniques an entity uses to develop accounting estimates.

And the Board tentatively decided:

  1. not to amend the definition of accounting policies (i.e. to retain the existing definition of accounting policies in IAS 8);
  2. to clarify that if a change is a change in accounting estimate, it cannot also be a change in accounting policy;
  3. not to add discussion, that was included in paragraph 32B of the Exposure Draft, on whether selecting an inventory cost formula constitutes selecting an accounting policy;
  4. to confirm the deletion of Example 3 from the Guidance on implementing IAS 8; and
  5. add to the Guidance on implementing IAS 8 examples that illustrate how an entity would apply the definition of accounting estimates—this material would accompany, but not be part of, IAS 8.

The Board tentatively decided to finalize the amendments with the modifications set out above; and not to re-expose them. The Board will discuss the transition requirements and effective date of the amendments at a future meeting. It will also review the project’s due process steps.

Review the IASB Update and podcast on the Board's Web site.

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