Accounting policies and accounting estimates

Date recorded:

Accounting Policies and Accounting Estimates - Deletion of IG Example 3 from IAS 8 - Agenda paper 26

Background and Staff analysis

The Staff are currently drafting the ED on the proposed amendments to IAS 8 to clarify the distinction between accounting policies and accounting estimates. Upon a review of IAS 8, the Staff believe that IG Example 3 is not useful in illustrating how to distinguish between accounting policies and accounting estimates.

The purpose of IG Example 3 is to illustrate prospective application of a change in accounting policy when retrospective application is not practicable. The example states that applying a component approach more fully for depreciation purposes is a change in accounting policy.

The Staff believe that this statement raises several questions, for example:

  1. Was the failure to apply the component approach ‘more fully’ in prior years an accounting error?
  2. Did the entity conclude appropriately in prior years that the effect of not applying the components approach ‘more fully’ was not material?

The Staff believe that the example does not fully address the distinction between accounting policies, accounting estimates and errors, as well as the application of the materiality concept. The Staff considered but rejected rewriting the example because they believe that it would produce little benefit.

Staff recommendation

The Staff recommended that the Board propose to delete IG Example 3 from IAS 8 in the ED.


The Board approved the Staff recommendation without discussion.

Correction list for hyphenation

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