Companies often struggle to distinguish between accounting policies and accounting estimates, and divergent practices have been observed. The Interpretations Committee received a request to clarify the distinction, and passed it to the International Accounting Standards Board (IASB) which has now published an amendment.
The amendment requires that companies should distinguish changes in accounting policies from changes in accounting estimates. Changes to estimates are applied prospectively compared to changes in accounting policies which are applied retrospectively, therefore requiring a restatement.
The changes to IAS 8 focusses on accounting estimates and clarifies that accounting estimates are “monetary amounts in financial statements that are subject to measurement uncertainty”.
The amendment replaces the ‘definition of a change in accounting estimates’ with a ‘definition of accounting estimates’.
IASB also clarified that a change in accounting estimate that results from new information or new developments is not the correction of an error. In addition, the effects of a change in an input or a measurement technique used to develop an accounting estimate are changes in accounting estimates if they do not result from the correction of prior period errors.
The amendment is effective for annual periods beginning on or after 1 January 2023. Earlier application is permitted.
We have released the 2026 edition of our annual publication Navigating the Changes to IFRS, updated for the changes to IFRS Accounting Standards issued in 2025.
This newsletter highlights IAS and IFRS amendments, proposed amendments, and decision points that have been released from April 2021 to October 2021.
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