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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 8L3 · Advanced

Documents

Management memo on the change in cost formula

Memo

Management memo on the change in cost formula

Quincaillerie Talmeuse SA (fictitious entity) sells a range of steel sheets launched on 1 January 20X3 and measured so far at weighted average cost computed over the year. From the 20X5 financial year, management adopts FIFO: the sheets are stored in dated batches and sold in the order they came in, so FIFO follows the physical flow and brings the value of inventory closer to its replacement cost, in a market where prices rise steadily. The 20X5 statements present 20X4 as comparative. No IFRS requires this change.

Retrospective restatement schedule

Voluntary change in the inventory cost formula: justification, restatement and disclosures

4 documents9 sections to document
0 / 6 sections completed
Guided mode

Section 1 of 9

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
Advanced
Estimated time
≈ 50 min
Progress
0 / 5 steps done (review excluded)

Context

Quincaillerie Talmeuse SA (fictitious listed entity) moves from weighted average cost to FIFO for a range of steel sheets from 20X5. You prepare the restatement of the 20X4 comparatives and the note.

Assignment

Restatement schedule: move from weighted average cost to FIFO

Purpose of the workpaper

For a change in accounting policy applied retrospectively or a prior period error, determine the cumulative pre-tax effect at the beginning of the earliest period presented (or of the earliest practicable period), its tax effect at the rate given by the case and the net adjustment to opening retained earnings; isolate the effect specific to the comparative period, restate the line item concerned and the comparative profit, reconcile restated equity, then post the entries and prepare the disclosures.

Questions of the file covered by this workpaper

  • Measure inventory at 31 December 20X3 and 31 December 20X4 under both formulas.
  • Determine the cumulative effect at the opening of 20X4, at the end of 20X4 and the effect specific to 20X4.
  • Compute the tax effects and the corresponding net amounts.
  • Determine restated retained earnings at 1 January 20X4.
  • Present the restatement entries (opening of 20X4 and 20X4 column).

Documents in the file

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