Effect of accounting policy choices — Accounting glossary

A policy must comply with applicable IFRS requirements and be applied consistently to similar transactions. Where a standard permits alternatives, assess the effect on measurement, profit and later periods, explain material policy information, and consider requirements for changes in policy. A change is not freely available merely to achieve a preferred result.

Worked example

For interchangeable inventory, FIFO and weighted-average cost may produce different costs of sales during a period of rising prices. An entity applies the selected permitted formula consistently to inventories of similar nature and use.

Common mistake

Using LIFO as an IFRS inventory option, or assuming changing a policy to increase profit is automatically permitted.

Where it appears in your exams

Qualification	Exam	Relationship	Period
ACCA	FR	Direct	September 2026–June 2027
ACCA	SBR	Supporting	September 2026–June 2027