IAS 8

Overview and Scope

International Accounting Standard 8: Accounting Policies, Changes in Accounting Estimates and Errors (IAS 8) is an international financial reporting standard adopted by the International Accounting Standards Board (IASB). The standard prescribes the criteria for selecting and changing accounting policies, along with the accounting treatment and disclosure of changes in accounting estimates and corrections of prior period errors. IAS 8 is designed to enhance the relevance and reliability of an entity's financial statements and the comparability of those statements over time and with the financial statements of other entities.

Structure

The standard is organised as follows (paragraph numbers refer to the version of IAS 8 including all amendments issued before the changes made by IFRS 18):

Structure of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors
Part Content Paragraphs
General Objective 1–2
Scope 3–4
Definitions 5–6
Accounting policies Selection and application of accounting policies 7–12
Consistency of accounting policies 13
Changes in accounting policies, including retrospective application and its limitations 14–27
Disclosure 28–31
Accounting estimates Accounting estimates and changes in accounting estimates 32–38
Disclosure 39–40
Errors Correction of prior period errors, including limitations on retrospective restatement 41–48
Disclosure 49
Impracticability in respect of retrospective application and retrospective restatement 50–53
Effective date and transition 54 ff.
Withdrawal of other pronouncements 55–56

Accounting Policies

Accounting policies are the specific principles, bases, conventions, rules, and practices applied by an entity in preparing and presenting financial statements. When an IFRS specifically applies to a transaction, the accounting policy for that item must be determined by applying the relevant standard. In the absence of a specific IFRS, management must use judgment to develop a policy that results in relevant and reliable information. Such judgment should consider the requirements in IFRSs dealing with similar issues and the definitions and recognition criteria in the Conceptual Framework.

Changes in accounting policies are generally applied retrospectively by adjusting the opening balance of each affected component of equity for the earliest prior period presented. An entity shall change an accounting policy only if the change is required by an IFRS or results in the financial statements providing more reliable and relevant information.

Changes in Accounting Estimates

A change in accounting estimate is an adjustment of the carrying amount of an asset or liability resulting from new information or developments. These changes are recognized prospectively by including them in profit or loss in the period of the change and future periods. Unlike accounting policies, changes in estimates do not require the restatement of prior periods because they do not relate to errors.

Prior Period Errors

Prior period errors are omissions from, and misstatements in, an entity's financial statements for one or more prior periods. Material prior period errors must be corrected retrospectively in the first set of financial statements authorized for issue after their discovery. This involves restating the comparative amounts for the prior period(s) presented in which the error occurred.

Summary of accounting treatments

The following table summarises how IAS 8 requires the different types of changes and corrections to be accounted for:

Accounting treatment under IAS 8
Type of change Situation Treatment Paragraphs
Change in accounting policy Initial application of an IFRS that includes specific transitional provisions, including early application In accordance with the specific transitional provisions of that IFRS 19(a)
Initial application of an IFRS without specific transitional provisions, or voluntary change in accounting policy Retrospective application 19(b), 22
Change in accounting estimate Prospective application in the period of the change and, if affected, future periods 36–38
Material prior period error Retrospective restatement 42

Where retrospective application or retrospective restatement is impracticable, IAS 8 permits it to be applied from the earliest date for which it is practicable (paragraphs 23–25 and 43–45).

Booking Examples for IAS 8

The following examples illustrate the difference between prospective and retrospective adjustments.

1. Change in Accounting Estimate (Prospective)

IAS 8 requires prospective application: the new rate applies from the date of change without restating prior years.

Scenario: Cost: $100,000 (Jan 1, 2021) | Original Life: 10 years ($10k/yr) | Revision: On Jan 1, 2024, life reduced to 5 years total (2 years remaining).

Calculation: Carrying Amount (2024): $100,000 - $30,000 = $70,000. | New Depreciation: $70,000 / 2 years = $35,000/yr.

Journal Entry (Dec 31, 2024):

AccountDebitCreditRationale
Depreciation Expense (P&L)$35,000Applied to remaining book value.
Accumulated Depreciation$35,000No restatement of 2021–2023.

2. Correction of a Prior Period Error (Retrospective)

Scenario: In 2024, a company discovers it failed to record $50,000 of expenses in 2023.

EventDebitCreditRationale
Error CorrectionRetained Earnings (Opening Balance)Accrued Liabilities / CashThe opening balance of equity is adjusted to reflect the error as if it had never occurred.

References

  1. ↑ IASB. IAS 8, Paragraph IN1.
  2. ↑ Deloitte. IAS 8 — Accounting Policies, Changes in Accounting Estimates and Errors Summary.
  3. ↑ IASB. IAS 8, Paragraph 1.
  4. ↑ "IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors". IFRS Foundation. Retrieved 10 November 2026.
  5. ↑ IASB. IAS 8, Paragraph 5.
  6. ↑ Deloitte. IAS 8 — Selection of accounting policies.
  7. ↑ IASB. IAS 8, Paragraph 10.
  8. ↑ IASB. IAS 8, Paragraph 11.
  9. ↑ IASB. IAS 8, Paragraph 22.
  10. ↑ Deloitte. IAS 8 — Voluntary changes in accounting policy.
  11. ↑ IASB. IAS 8, Paragraph 5.
  12. ↑ Deloitte. IAS 8 — Prospective application of changes in estimates.
  13. ↑ IASB. IAS 8, Paragraph 36.
  14. ↑ IASB. IAS 8, Paragraph 5.
  15. ↑ Deloitte. IAS 8 — Correction of prior period errors.
  16. ↑ IASB. IAS 8, Paragraph 42.
  17. 1 2
  18. ↑ IASB. IAS 8, Para 36.
  19. ↑ Deloitte. IAS 8 Summary.
  20. ↑ IASB. IAS 8, Para 38.
  21. ↑ IASB. IAS 8, Para 37.
  22. ↑ Deloitte. IAS 8 Estimates.
  23. ↑ IASB. IAS 8, Paragraph 42.