Judgements made in applying accounting policies

Learning objectives

• Identify the judgements to be disclosed in the notes.L2
• Distinguish a judgement in applying an accounting policy from an estimate.L2, L3

Normative references

• IAS 1 §122An entity discloses, along with its accounting policy information, the judgements, apart from those involving estimations, that management has made in the process of applying the accounting policies and that have the most significant effect on the amounts recognised.

Original summaries of the paragraphs (reference register), never a quotation of the standard.

1 question

• For its notes, Atlas SA identifies two matters (case facts). Matter 1: after analysing its contracts, management concludes that Atlas acts on its own account in a trading activity; this conclusion involves no estimation and has the most significant effect on the revenue recognised. Matter 2: the measurement of a litigation provision rests on assumptions about the outcome of a lawsuit and carries a significant risk of a material adjustment to its carrying amount within the next financial year. How does IAS 1 treat these two matters in the notes?L2