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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.
10.5 Applying changes in accounting policies
10.5.1 Extracts from FRS 102 – Section 10.11
10.11 An entity shall account for changes in accounting policy as follows:
(a) an entity shall account for a change in accounting policy resulting from a change in the requirements of an FRS or FRC Abstract in accordance with the transitional provisions, if any, specified in that amendment;
(b) when an entity has elected to follow IAS 39 Financial Instruments: Recognition and Measurement and/or IFRS 9 Financial Instruments instead of following Section 11 Basic Financial Instruments and Section 12 Other Financial Instruments Issues as permitted by paragraph 11.2, and the requirements of IAS 39 and/or IFRS 9 change, the entity shall account for that change in accounting policy in accordance with the transitional provisions, if any, specified in the revised IAS 39 and/or IFRS 9; and
(c) when an entity is required or has elected to follow IAS 33, IFRS 8 or IFRS 6 and the requirements of those standards change, the entity shall account for that change in accounting policy in accordance with the transitional provisions, if any, specified in those standards as amended; and
(d) an entity shall account for all other changes in accounting policy retrospectively (see paragraph 10.12).
10.5.2 OmniPro comment
10.5.2.1 Change in accounting policy due to a change to requirements issued by the FRC
Where a change in accounting policy arises as a result of a change in the requirements of the FRS then this accounting policy should be adjusted in (Section 10.11 (a) of FRS 102) accordance with the guidance issued with the change as to how this should be accounted for.
The new guidance contained in the FRS, will instruct how this should be treated.
10.5.2.2 Change in accounting policy due to adoption of IAS 39 or IAS 33
Where an entity elects to account under the above IFRS standards then the treatment of the change in policy should be accounted for in line with that standard and can use any transition exemptions included in that standard (Section 10.11 (b) of FRS 102).
10.5.2.3 Change in accounting policy due to other reasons (Section 10.11 (c) of FRS 102)
Where a change of accounting policy arises for a reason other than the above two reasons, then the change should be accounted for retrospectively. The only exception is where an option of revaluating PPE or intangible assets is adopted as Section 17 makes it clear that this should be accounted for prospectively. This is discussed further below.
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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 Example 6: Prior period error
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