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IAS 8Workpapers (Step 4 of 5)

Workpaper assignment

Step 4 of 5

IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors — wording before IFRS 18Applicable today

Applies to annual periods beginning before January 1, 2027.

Mission · workpaperWorkpaper · IAS 8L1 · Fundamental

Documents

Closing memo: ten changes of the 20X5 financial year

Memo

Closing memo: ten changes of the 20X5 financial year

Memo from the chief accountant of Ondalys Distribution SAS (fictitious entity, office equipment distributor), dated 20 February 20X6. The 20X5 statements have not yet been approved; the 20X4 statements were authorised for issue on 18 March 20X5. Changes noted: (1) the useful life of the delivery vans goes from 5 to 7 years, following mileage tracking set up in 20X5; (2) the inventory cost formula changes from FIFO to weighted average cost (see D3); (3) a December 20X5 transport invoice of 18,400 was not recorded (see D2); (4) a December 20X4 warehouse rent of 9,600, invoiced in January 20X5 before the 20X4 statements were approved, was never accrued or recognised in 20X4; (5) an equipment rental business, which did not exist before, starts in 20X5 and is given an accounting policy; (6) the expected credit loss rates on receivables are updated with the 20X5 default statistics; (7) land is measured for the first time under the revaluation model; (8) investment property moves from the cost model to the fair value model; (9) a claim against a supplier, for which no amount had been recognised, is settled in 20X5 by a payment of 12,000 received by Ondalys; (10) the fair value of an unlisted investment is now estimated by discounting cash flows rather than by market multiples. Draft 20X5 profit, before items 3 and 9: 314,400.

Change classification matrix: Change 9 — supplier dispute

Policy, estimate or error? Reasoned sorting of ten changes in a distribution SME

4 documents8 sections to document
0 / 5 sections completed
Guided mode

Section 1 of 8

Objective

In progress
Section brief
What to document
The engagement, its scope and the working mode chosen.
Why
A workpaper answers one precise question: framing it avoids off-topic work.
How
Read the objective and the assignment, then choose the mode (guided, semi-guided, professional).
Expected result
You know which question the workpaper must settle, and for which reporting date.
Your role
Preparer of the IAS 8 workpaper
Level
Foundation
Estimated time
≈ 30 min
Progress
0 / 4 steps done (review excluded)

Context

Ondalys Distribution SAS (fictitious entity) is preparing its 20X5 statements. The chief accountant has listed ten changes that arose during the year. You are asked to classify them before the statements are approved, without any restatement calculation at this stage (dealt with in other cases).

Assignment

Classification matrix: changes 1, 4 and 9

Purpose of the workpaper

For each change of the period (one instance per change), describe the facts and the date on which the information was available, review the definitions, the conditions for a change in accounting policy and the nature of an estimate, measure where useful what the classification puts at stake (gap between prospective treatment and retrospective restatement), then classify the change, give the rationale and route it to its treatment and disclosures.

Questions of the file covered by this workpaper

  • Classify each of the ten changes: change in accounting policy, change in estimate, error (current or prior period) or neither.
  • Are changes 2, 7 and 8 permitted changes in accounting policy, and under which rules?
  • Measure what the classification of change 9 puts at stake: corrected 20X5 profit and profit if the payment were wrongly treated as an error correction.

Documents in the file

Open the documents to pick out the relevant information.

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