Profile Photo

IND AS 8 : Indian Accounting Standard 8

Retrospective Application – Change in Accounting Policy – IND AS 8 – DipIFR

The retrospective application will apply retrospectively, except that it is impractical to determine retrospective effect or cumulative effect. If it is impractical to determine the retrospective effect, an entity may make adjustments to the number of assets and liabilities that are possible in the first period, such as changes in the current period and the initial balance. If this is difficult to determine, the unit is likely to change.

The objective of Indian Accounting Standard 8 is to increase the reliability and relevance of the company’s financial statements. The aim is to better compare them within the entity and with the financial statements of other entities.


What is the accounting treatment for change in accounting policy?

In case of voluntary change in accounting policy, the change is applied retrospectively.
If the change is required by a specific Ind AS, follow the transitional provisions.
Retrospective means as if the entity has been using the same accounting policy since beginning.

This change can impact one period specific effect) or may impact all the years cumulatively till date (Cumulative effect of the change).

Suppose current measurement basis of Inventory is FIFO method
We wish to change the accounting policy to weighted average method
We believe that we will account it under weighted average method as if we have been using Weighted average since beginning)


31 March 2015         Inventory                           under FIFO                                     4000
1 April 2015             Inventory                             under Weighted Average             3500



Retained earnings a/c                                 Dr 500
Inventories a/c                                             Cr 500

Browse the video…

What if it is impracticable to apply the change in accounting policy?

When it is impracticable for an entity to apply a new accounting policy retrospectively, because it cannot determine the cumulative effect of applying the policy to all prior periods, the entity will apply the new policy prospectively from the start of the earliest period practicable.
It therefore disregards the portion of the cumulative adjustment to assets, liabilities and equity arising before that date.
Changing an accounting policy is permitted even if it is impracticable to apply the policy prospectively for any prior period.
Impracticable-Retrospective application as far as it is practicable to do so.


How is the effect of change in estimate applied in accounting?

The effect of change in an accounting estimate shall be recognised prospectively by including it in profit or loss in:

(a) The period of the change, if the change affects that period only; or

(b) The period of the change and future periods, if the change affects both.

Example: A provision for Depreciation is initially recognised by reflecting this as a charge to Profit and Loss. A change in such an estimate that would occur in a subsequent period, would also be taken to Profit and Loss.

So only the current year and future years see the change of effect when estimate changes.

Asset with a Historical cost of Rs.100,000 with a Net Book Value of Rs. 60,000 having suffered depreciation of 40,000 with a charge of Rs. 20,000 every year on straight line basis.

If the depreciation method changes to written down value method and remaining useful life is 3 years.
The rate of depreciation is decided at 30%
So, charge in 3rd year for depreciation equal to 30%*60000= Rs. 18000 applied prospectively without making any changes in prior periods.


Prior Period Errors

How to apply the effect retrospectively for correction of errors?
Suppose there is an error relating to calculation of inventory which was discovered in the current year.
The error is impacting prior periods and the effect has to be applied retrospectively.

31 March 2015               Inventory With Error                           4000
1 April 2015                   Inventory Without Error                      3500



Retained earnings a/c               Dr 500
Inventories a/c                           Cr 500


In summary

Change in accounting policy                          RETROSPECTIVE Application
Change in accounting estimate                     PROSPECTIVE application
Prior period errors                                          RETROSPECTIVE application


How to Clear DipIFR Exam? 5 Steps to prepare for clearing Dip IFR

Want to get an ACCA IFRS certification, take IFR Course Online and start your preparation today without any delays.
If yes, then visit us and register yourself today or call @8800999280/83/84 and prepare yourself for ACCA DipIFR Certification now with our IFR expert faculty ACCA Amit Kumar.


Call at 8800999280 / 8800999283 / 8800999284 fill the form for any other details:


Important Tags: Retrospective Application / IND AS 8 / Change in Accounting Policy / Indian Accounting Standard 8 / Weighted Average Method / Prior Period Errors

May 20, 2020

No comments, be the first one to comment !

    Leave a Reply

    Your email address will not be published. Required fields are marked *

    © 2015-19 Takshila Learning. All Rights Reserved.
    Request Callback
    close slider
    Send us a Message


    Open chat
    Whats App
    Hello , How May I Help You?
    Takshila Learning IND AS 8 : Indian Accounting Standard 8
    Powered by