Consistency of policies and categories

Learning objectives

• Identify an inconsistent application of policies to similar transactions and the cases where an IFRS permits categorisation.L1, L2

Normative references

• IAS 8 §13An entity selects and applies its accounting policies consistently for similar transactions, other events and conditions, unless an IFRS specifically requires or permits categorisation of items for which different policies may be appropriate; in that case, an appropriate policy is selected and applied consistently to each category.

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

9 questions

• Without a category provided by an IFRS, an entity may apply different policies to inventories of the same nature depending on the warehouse holding them.L1
• When an IFRS permits categories, the policy chosen for a category may vary from one transaction to another within that category.L2
• What principle does IAS 8 set for similar transactions?L1
• In which case may an entity apply different policies to items within the same line item?L2
• The Drusax group measures identical spare parts using FIFO in its northern warehouse and weighted average cost in its southern one, 'out of local habit'. There is no difference in nature or use (case data). What is the error?L2
• The standard applicable to Fairia's fixed assets allows a measurement model to be chosen by class of assets (context data). Fairia applies the revaluation model to some of its land and the cost model to the rest, depending on price movements. What is the error?L2
• The Jilval group holds two families of inventories of different nature and use; the applicable standard allows different cost formulas in that case (context data). Jilval applies FIFO to the first family and weighted average cost to the second, every year. How should this practice be described?L2
• Quiline has just acquired a subsidiary that depreciates its trucks on a diminishing balance basis, whereas Quiline depreciates trucks with the same use on a straight-line basis. For the consolidated accounts, the controller proposes keeping both methods. What is the conclusion?L2
• Fauscot has always included freight on purchases of goods in the cost of inventories. For a new supplier with similar deliveries, the accountant proposes expensing these costs directly. What should be done?L1