Responsabilidad Ética

• Accounting policies are the specific principles, bases, conventions, rules and practices used by an entity to prepare its financial statements.

• A hierarchy of alternative sources is given to assist management in applying judgement to develop an appropriate accounting policy if FRS 102 does not cover a specific issue. Management may, but is not required to, consider the requirements and guidance of EU-IFRS.

• Accounting policies are applied consistently.

• Accounting policies are changed only when mandated by FRS 102 or in order to provide reliable and more relevant information.

• Changes in accounting policies are applied retrospectively, except when mandated changes have specific transitional provisions or when (unusually) retrospective application is impracticable.

• A change in accounting estimate is an adjustment to the carrying amount of an asset or liability, or useful life of an asset, that results from a change in the associated expected future benefits and obligations.

• Changes in accounting estimates result from new information or new developments and accordingly are not corrections of errors.

• Changes in accounting estimates are accounted for prospectively.

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vs previous UK GAAP

Applicable standards: FRS 3, FRS 18

pUK10.1 Under FRS 3 fundamental prior period errors are corrected retrospectively by restating the comparatives (rather than material prior period errors as under FRS 102). A fundamental error is defined by FRS 3 as an error that is ‘of such significance as to destroy the true and fair view and hence the validity of the prior period financial statements’. pUK10.2 Under FRS 3 the cumulative effect of prior period adjustments is noted at the foot of the current year statement of

recognised gains and losses. Under FRS 102 this is not included in the statement of comprehensive income, but shown only in the statement of changes in equity.

© 2013 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.

10 Accounting policies, estimates and errors |

FRS 102

Section 10

10.1 Accounting policies are the specific principles, bases, conventions, rules and practices applied by an entity in preparing and presenting financial statements. [FRS102.10.2]

Hierarchy

10.2 When FRS 102 does not give specific guidance, judgement is used in developing an appropriate accounting policy that results in information that is relevant and reliable. The following hierarchy of alternative sources is given to assist management in applying that judgement:

(i) the requirements and guidance in FRS 102 on similar and related issues;

(ii) the requirements and guidance in an applicable Statement of Recommended Practice (SORP) on similar and related issues;

(iii) the definitions, recognition criteria, measurement concepts and pervasive principles in Section 2 Concepts and pervasive principles. [FRS102.10.5]

10.3 Management may also, but is not required to, consider the requirements and guidance of EU-IFRS on similar and related issues. Entities apply IAS 33, IFRS 6 or IFRS 8 when required to do so. [FRS102.1.3-7, FRS102.10.6] Consistency

10.4 Accounting policies are applied consistently. If FRS 102 or another FRS or FRC Abstract specifically requires or permits items to be divided into separate categories for which different policies may be appropriate, then the policy is applied consistently within each category. [FRS102.10.7]

Changes to accounting policies

10.5 Accounting policies may be changed only if required by changes to FRS 102, another applicable FRS or FRC Abstract, or if the change results in reliable and more relevant information. [FRS102.10.8]

10.6 The introduction of accounting policies for new transactions or transactions that differ in substance from those occurring previously does not constitute a change in accounting policy. This is also the case for a change to the cost model when a reliable measure of fair value is no longer available (or vice versa) when fair value accounting is either required or permitted under FRS 102. [FRS102.10.9]

10.7 When FRS 102 allows a choice of accounting treatment a change in this treatment is a change in accounting policy. [FRS102.10.10]

10.8 However, the initial decision to revalue assets is a revaluation in line with Section 17 Property, plant and equipment or Section 18 Intangible assets other than goodwill (and is therefore accounted for in the period of the revaluation) rather than a change in accounting policy to be accounted for as described in the paragraph below. [FRS102.10.10A] 10.9 When a change in accounting policy is mandated by a change in the requirements of FRS 102, the transitional

provisions included in that new requirement take precedence. If the entity has elected to follow IAS 39 and/or IFRS 9 rather than Section 11 Basic financial instruments and Section 12 Other financial instruments issues and there is a change to that standard, then the transitional provisions for the change in that standard are applied. Similarly, when an entity has elected to follow IAS 33, IFRS 6 or IFRS 8 and the requirements of those standards change, an entity follows any specified transitional provisions given in those standards. For all other changes, the change is applied retrospectively by restating prior periods unless it is impracticable to determine the effect on individual prior periods. The entity makes every reasonable effort to apply the change retrospectively before concluding that it is impracticable to do so. When restatement is impracticable, the change in policy is applied prospectively from the start of the earliest period practicable (which may be the current period), with a corresponding adjustment to the opening balance of each affected component of equity. [FRS102.10.11]

10.10 Disclosure is made of the nature and effect of the change in accounting policy on both the current and prior periods. [FRS102.10.13]

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| Cutting through UK GAAP

vs EU-IFRS

Applicable standards: IAS 1, IAS 8

IFRS10.1 Under EU-IFRS, the hierarchy of guidance to consider in the absence of specific requirements includes pronouncements issued by other standard-setting bodies or industry practice as a source. These sources are not included in FRS 102, except for industry practice that is documented in a Statement of Recommended Practice (SORP).

IFRS10.2 A statement of financial position as at the beginning of the earliest comparative period is presented when an entity restates comparative information following a change in accounting policy, correction of an error, or reclassification of items in the financial statements.

© 2013 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.

10 Accounting policies, estimates and errors |

Changes in accounting estimates

10.11 A change in accounting estimate is a change in the carrying amount, expected useful life or usage pattern of an asset or liability resulting from a reassessment of the expected future benefits and obligations associated with the assets and liabilities.

10.12 New information or developments that result in changes to accounting estimates are not classified as correcting errors. 10.13 If it is difficult to make a distinction between a change in an accounting policy and a revision to an accounting

estimate, then the change is treated as that of an accounting estimate. [FRS102.10.15]

10.14 Changes in accounting estimates are recognised prospectively in profit or loss from the period of change. For example, a change in the estimate of the useful life or method of recognising depreciation for property, plant and equipment is accounted for prospectively as a change in estimate by adjusting depreciation in the current and future periods. Disclosure is made of the nature and effect of the change in accounting estimate. [FRS102.10.16]

Corrections of prior period errors

10.15 Prior period errors are omissions or misstatements in the financial statements relating to one or more prior periods arising from a failure to use (or misuse of) information that was available when the financial statements were authorised for issue, and that could reasonably have been expected to have been taken into account. Examples include mathematical mistakes, fraud and oversight of facts. [FRS102.10.19]

10.16 Omissions or misstatements are considered material if they could, individually or collectively, influence the economic decisions of the users of the financial statements. [FRS102.2.6]

10.17 Material prior period errors are corrected retrospectively in the first financial statements after their discovery by restating the comparative amounts, or (if the error occurred before the start of the earliest prior period presented) restating the opening balances of assets, liabilities and equity for the earliest prior period presented, unless it is impracticable to do so. [FRS102.10.21]

10.18 When it is impracticable to determine the period-specific effect of an error on comparative information, restatement is made for the earliest period for which retrospective restatement is practicable (which may be the current period). [FRS102.10.22]

© 2013 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.

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