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Section 10 – Accounting Policies, Estimates and Errors
10.2 Selection and application of accounting policies
10.2.1 Extract from FRS 102 – Section 10.2-10.6
10.3 Consistency of accounting policies
10.3.1 Extract from FRS 102- Section 10.7
10.3.2 OmniPro comment – Consistency of accounting policies
10.4 Changes in accounting policies
10.4.1 Extracts from FRS 102 – Section 10.8 – 10.10A
10.4.2.1 Definition of change in accounting policy
10.4.2.2 Changes in accounting policies and one exception to retrospective adjustment
10.4.2.3 Examples of changes in accounting policy
10.4.2.4 Examples of items which are not changes in accounting policies
10.5 Applying changes in accounting policies
10.5.1 Extracts from FRS 102 – Section 10.11
10.5.2.1 Change in accounting policy due to a change to requirements issued by the FRC
10.5.2.2 Change in accounting policy due to adoption of IAS 39 or IAS 33
10.5.2.3 Change in accounting policy due to other reasons (Section 10.11 (c) of FRS 102)
10.6 Retrospective application
10.6.1 Extracts from FRS 102 – Section 10.12
10.6.2 OmniPro comment – Retrospective application – change in accounting policy
10.7 Disclosure of a change in accounting policy
10.7.1 Extracts from FRS 102-Section 10.13 – 10.14
10.8 Changes in accounting estimates
10.8.1 Extracts from FRS102 section 10.15 – 10.18
10.8.2 OmniPro comment – change in accounting estimates
10.8.2.2 Examples of change in accounting estimate
10.8.2.3: Revising residual value – worked example
10.8.2.4: Disclosure of accounting estimates
10.9 Corrections of prior period errors
10.9.1 Extracts from FRS102 section 10.19 – 10.23
10.9.2.1 Assessment and accounting for a prior period error
10.9.2.2 Disclosures of prior period errors
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The below extracts and guidance is applicable for periods beginning before 1 January 2019 and are based on the September 2015 version of FRS 102. For periods beginning on or after 1 January 2019, the March 2018 version of FRS 102 applies which incorporates the changes made by the Triennial review of FRS 102. Note the March 2018 version of FRS 102 can be voluntarily applies for periods beginning before 1 January 2019. For the extracts from the March 2018 version of FRS 102 and the related guidance please click on the following link. For details of a summary of the main changes as a result of the triennial review please see the following link.
10.7 Disclosure of a change in accounting policy
10.7.1 Extracts from FRS 102-Section 10.13 – 10.14
10.13 When an amendment to an FRS or FRC Abstract has an effect on the current period or any prior period, or might have an effect on future periods, an entity shall disclose the following:
(a) the nature of the change in accounting policy;
(b) for the current period and each prior period presented, to the extent practicable, the amount of the adjustment for each financial statement line item affected;
(c) the amount of the adjustment relating to periods before those presented, to the extent practicable; and
(d) an explanation if it is impracticable to determine the amounts to be disclosed in (b) or (c) above.
Financial statements of subsequent periods need not repeat these disclosures
10.14 When a voluntary change in accounting policy has an effect on the current period or any prior period, an entity shall disclose the following:
(a) the nature of the change in accounting policy;
(b) the reasons why applying the new accounting policy provides reliable and more relevant information;
(c) to the extent practicable, the amount of the adjustment for each financial statement line item affected, shown separately:
(i) for the current period;
(ii) for each prior period presented; and
(iii) in the aggregate for periods before those presented; and
(d) an explanation if it is impracticable to determine the amounts to be disclosed in (c) above.
Financial statements of subsequent periods need not repeat these disclosures.
10.7.2 OmniPro comment
It is clear that Section 10.13 and 10.14 of FRS 102 requires disclosure as to why a change in policy occurred i.e. made voluntarily (Section 10.14) or as a result of an FRC requirement (Section 10.13).
The procedure for a change in accounting policy is similar to the disclosure of prior period adjustments due to a prior year error. See the worked Example 6 at 10.9.2.2 which illustrates these disclosures.
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Example 1: Change in accounting policy
Example 2: Revising a residual value of an asset
Example 3: Revising a useful life of an asset
Example 4: Change in accounting estimate disclosure
Example 5: Change in functional currency – extract from notes to the financial statements
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