FTA APPROVED TAX AGENCY
VAT Returns deadline is 28th of every month. Excise Tax Returns deadline is 15th of every month ESR Notification Submission deadline, 6 months from the end of the financial year ESR Report Submission deadline, 12 months from the end of the financial year Click here to know the Foreign Exchange (FX) rates applicable for VAT from the UAE Central Bank website
+971 4 2699 329
Audit Firms in Dubai

IAS 8 – Accounting Policies, Changes in the Accounting Estimates and Errors

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

Example:

    • 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 :
          • Nature and amount of change that has an effect in the current period (or expected to have in future)
          • Fact that the effect of future periods is not disclosed because of impracticality
        • Error
          • Nature of the prior period error
          • For each prior period presented, if practicable, disclose the correction to:
            • − Each line item affected
            • − Earnings per share (EPS)
          • Amount of the correction at the beginning of earliest period presented
          • If retrospective application is impracticable, explain and describe how the error was corrected
          • Subsequent periods need not to repeat these disclosures.

 

Spectrum Auditing is an expert firm in providing genuine advice on all the established laws that govern the business in UAE. Our passion and heart lie in serving the clients and we aim at utmost client’s satisfaction. We are registered Auditors under the Ministry of Economy UAE and also registered Tax Agent from Federal Tax Agency UAE, Dubai providing dedicated Audit, Accounting, Tax services and various Business Advisory Services complying regulatory requirements.

Reach us to have a frills free life in your journey in Dubai, UAE. We at Spectrum will assist you in taking care of all the legal procedures involved in the IFRS process. Call us today for any kind of business assistance at +971 4 2699329 or email us at [email protected] to get all your queries addressed. Spectrum is your partner in your success.

 

Leave a Reply

Your email address will not be published.



Contact

balaram

Balaram Vuchidi

Managing Director
+971 50 9866 466
[email protected]
Anti Money Laundering Law   contact us
Enquire with Us