
Paper F7: Financial reporting (International)
98 Go to www.emilewoolfpublishing.com for Q/As, Notes & Study Guides © EWP
should be applied retrospectively, which means that the change should be applied to
the opening balances at the start of Year 2 (in the comparative prior period
information), as if the new policy had always been applied.
Similarly, any other comparative amounts in previous periods should be adjusted as
if the new accounting policy had always been applied.
If this is impracticable, retrospective application should be applied from the earliest
date that is practicable.
1.3 Disclosure of a change in accounting policy
When an entity makes a change in an accounting policy, a note to the financial
statements should disclose the following information about the change:
If the change is due to a new Standard
or a new Interpretation
If the change in policy is voluntary
The title of the Standard or
Interpretation
The nature of the change in
accounting policy
The nature of the change in
accounting policy
A description of any transitional
provisions
The reason why the new accounting
policy provides reliable and more
relevant information
For the current and previous
period(s), to the extent practicable,
the amount of the adjustment to
each item in the financial statements
and the adjustment to the basic and
fully diluted earnings per share
For the current and previous
period(s), to the extent practicable,
the amount of the adjustment to
each item in the financial statements
and the adjustment to the basic and
fully diluted earnings per share
To the extent practicable, the
adjustment relating to accounting
periods before those presented in
the financial statements
To the extent practicable, the
adjustment relating to accounting
periods before those presented in
the financial statements
If retrospective application is
impracticable, an explanation of
how the accounting policy change
has been applied
If retrospective application is
impracticable, an explanation of
how the accounting policy change
has been applied
1.4 Accounting estimates
An accounting estimate is made for an item in the financial statements when the
item cannot be measured with precision, and there is some uncertainty about it. An
estimate is therefore based, to some extent, on management’s judgement.
Management estimates might be required, for example, for the following items:
bad debts
inventory obsolescence