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The Bruce Column — Judgements - application or estimation: the question remains

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Oct 13, 2017

Regulators care about the difference between judgements that relate to applying accounting policies and judgements involving estimations. As Robert Bruce reports, they are not the only ones.

It is often argued that the problem with economics is that it is neither an art nor a science. And when it comes to some areas of accounting and financial reporting the same dilemma becomes apparent. Quite what is the difference between judgement in determining what accounting policy applies to a transaction (and how to apply it) and what has been estimated in applying that policy?

Information about the key judgements and estimates provides very useful insights. It helps investors understand the choices and judgements management has had to make in preparing the financial statements.

It also allows investors to better assess the quality of the accounting policy decisions management makes and to identify those areas that rely on greater estimation. It enables people to think about what might happen and what may affect the outcomes being estimated. It throws light into a thought process that the blunt disclosure of a bald fact does not.

Review the entire column on our Global IAS Plus website.

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