IAS 8 Changes in accounting policies and accounting estimates 4 / 12

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MC Question 6

A company has decided to change its depreciation method to better reflect the pattern of use of its equipment.

Which of the following correctly reflects what this change represents and how it should be applied?

A    It is a change of accounting policy and must be applied prospectively
B    It is a change of accounting policy and must be applied retrospectively
C    It is a change of accounting estimate and must be applied retrospectively
D    It is a change of accounting estimate and must be applied prospectively

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MC Question 1

Which of the following is a change of accounting policy under IAS 8 Accounting Policies, Changes in Accounting
Estimates and Errors?

A

Classifying commission earned as revenue in the statement of profit or loss, having previously classified it as other operating income

B

Switching to purchasing plant using finance leases from a previous policy of purchasing plant for cash

C

Changing the value of a subsidiary’s inventory in line with the group policy for inventory valuation when preparing the consolidated financial statements

D

Revising the remaining useful life of a depreciable asset

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Specimen
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MC Question 7

Which of the following would be a change in accounting policy in accordance with IAS 8 Accounting Policies,
Changes in Accounting Estimates and Errors?

A

Adjusting the financial statements of a subsidiary prior to consolidation as its accounting policies differ from those of its parent

B

A change in reporting depreciation charges as cost of sales rather than as administrative expenses

C

Depreciation charged on reducing balance method rather than straight line

D

Reducing the value of inventory from cost to net realisable value due to a valid adjusting event after the reporting period

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