Judgement in financial reporting
Preparers apply judgement, for example, in assessing whether control exists, whether a performance obligation is distinct, or whether an accounting policy is appropriate. Measurement uncertainty and estimates involve related but distinct questions. Relevant material judgements and sources of estimation uncertainty are disclosed when required, so users can understand the financial statements.
Worked example
A company assesses whether substantive decision-making rights give it control of an investee, considering the contractual rights and relevant activities. If the judgement significantly affects recognised amounts, it considers the applicable disclosure requirements.
Common mistake
Treating professional judgement as unrestricted choice, or confusing a judgement about control with an estimate of a numerical amount.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | FR | Supporting | September 2026–June 2027 |
| ACCA | SBR | Supporting | September 2026–June 2027 |
