I wanted to ask about the difference between accounting policies & accounting estimates. I know that policies are issued by IFRS as new standard being introduced whereas accounting estimates are the method adopted by the entity such as depreciation method & useful life.
Is that correct or there could be any other example better than this? I need your opinion on this.
Ask the Tutor ACCA FR
Difference between accounting policies & accounting estimates
Hi,
Yes, the policy is how the company treats the item in the financial statements using the guidance provided in IFRS. So do we capitalise the item or expense it through profit or loss, say.
The estimate is the value attributed to the item that involves some element of professional judgement.
Thanks
Could you please shed some knowledge upon the change in policy characteristics such as:
recognition: it is where the expense is recognized as an asset?
presentation: It is where the expense is recorded as expense such as depreciation is included in the cost of sales rather administrative expenses?
Please correct me if I understand it correctly!
Recognition is when we need to decide on whether it is an asset/liability or income/expense and at what value.
Presentation is then where it is shown, current/non-current or C'o'S/Admin/Distribution etc.
Thanks
Sign in to reply to this topic.