Understanding the difference:

• Accounting principles are general rules and guidelines established and a defined framework.
• Accounting policies are procedures and standards that an entity uses to follow such principles, these are decided by the entity themselves, they are not universal and hence it can differ from one organization to another.
• Accounting estimates are used when it is impossible or impractical to provide exact number, this involves the element of professional judgement.
• Prior period errors are omissions and misstatements arising from failure to use/misuse of reliable information that was available when financial statements were issued and could have been reasonably expected to have taken into account in those financial statements. Errors include mathematical mistakes, mistakes in applying accounting policies, oversights and misinterpretation of facts and fraud

• • Matching concept is a principle which says costs should match to your benefits. For eg: instead of charging all the cost of fixed asset purchased at once to the statement of profit or loss as an expense, we depreciate it over a period of time to match the benefits the asset generates.
  • Now which method to use to depreciate such asset is an organisation’s decision and that is an accounting policy adopted.Hence you get to choose your accounting policy but that doesn’t mean you can choose anything you wish for, the policy should still fall in the framework established by accounting principles.
  • Accounting estimate can be assessing the useful life of asset or residual value etc. to be used in adopting such chosen accounting policy.
  • If depreciation for a couple of years has been charged to Statement of Profit or Loss instead of one year, then it is an error.

When can changes be done:

• Accounting policy
  • If standard /interpretation requires it.
  • If change will provide more relevant and reliable information.

• • Accounting Estimate
    • When reassessing the excepted future benefits and obligations associated with the asset or liability of the entity.

How to recognise the change :

• • Accounting policy
    • If change is due to new standard/interpretation, apply transitional provisions
    • If no transitional provisions apply, change retrospectively
    • If impractical to determine period-specific effects or cumulative effects of the change, then retrospectively apply to the earliest period that is practicable
  • Accounting Estimate
    • Recognise the change prospectively in:
    • Period of change (if it only effects that period).
    • Period of change and future periods (if applicable).
  • Error
    • Correct all errors retrospectively.
    • Restate the comparative amounts for prior periods in which error occurred or if the error occurred before that date – restate opening balance of assets, liabilities and equity for earliest period presented.
    • If impractical to determine period-specific effects or cumulative effects of the change, restate opening balances for earliest period practicable.
  • Disclosure
    • Accounting policy
      • The title of the standard / interpretation that caused the change
        1. Nature of the change in policy
        2. Description of the transitional provisions
        3. For the current period and each prior period presented, the amount of the adjustment to:
        − Each line item affected − Earnings per share
        1. Amount of the adjustment relating to prior periods not presented
        2. If retrospective application is impracticable, explain and describe how the change in policy was applied
        3. Subsequent periods need not repeat these disclosures.
      • Accounting Estimate :