Monthly Archives: October 2013

IAS 8 – Accounting policies, changes in accounting estimates and errors

Accounting policies, changes in accounting estimates and errors (IAS 8)
Last Updated: October 30, 2013

You can find a printer-friendly study sheet in PDF format by clicking here!

Selection and Application of Accounting Policies

  • If an IFRS specifically applies to a transaction the specific IFRS must be applied.
  • In the absence of specific guidance, management must use judgment which results in:
    • Relevant to the economic decision-making needs of users; and
    • Reliable, in that the financial statements:
      • Represent faithfully the financial position, performance and cash flows;
      • Reflect the economic substance of transactions and not just legal form;
      • Are free from bias;
      • Are prudent; and
      • Are complete in all material respects.

In the above judgments, management should refer to the following sources:

  1. IFRSs dealing with similar and related issues
  2. The definitions, recognition criteria and measurement concepts for assets, liabilities, income and expenses in the Framework.
  3. Could also consider the most recent pronouncements of other standard-setting bodies which use a similar conceptual framework or other accounting literature/accepted industry practices.

Other Notes

  • Entities should be consistent in their application of accounting policies for similar transactions.


Changes in Accounting Policies

Change in accounting policies is only permitted if:

  • Required by an IFRS; or
  • Results in equally reliable statements and more relevant information.

Changes in accounting policies must be applied retrospectively unless specific guidance is provided. The opening balance of each affected component of equity for the earliest prior period presented and other comparative amounts should be adjusted as if the policy was always in place.

Disclosures highlights: should include the nature of the change, reason for the change and amounts of the adjustment for each line item affected.

Changes in Accounting Estimates

The nature of accounting will result in occasional changes to accounting estimates, this is not the same as changes in accounting policies. When in doubt, IFRS requires you to assume it is a change in accounting estimate.

  • The effects of a change in accounting estimate shall be recognized prospectively by including it in profit or loss in:
    • The period of the change, if the change affects that period only; or
    • The period of the change and future periods, if the change affects both.
    • If the change in accounting estimate increases or decreases assets and liabilities, or equity, it shall be recognised by adjusting the carrying amount of the related asset, liability or equity item in the period of the change.



On occasion, there may be errors discovered in the financial statements from prior periods. Errors mean that the financial statements do not comply with IFRSs, contain either material errors or immaterial errors made intentionally. This differs from a change in estimates.

Errors are required to be corrected retrospectively in the first set of financial statements authorised for issue after their error discovery by:

  • Restating the comparative amounts of the prior period(s) in which the error exists; or
  • If the error occurred prior to the earliest prior period presented, a restatement of the opening balances of assets, liabilities and equity for the earliest prior period presented.

Disclosure highlights: should include the nature of the error, the amount of correction for each line item and the amount of the correction for the earliest prior period.


Type of Change Type of Adjustment
Change in Accounting Policy Retrospective Adjustment
Change in Accounting Estimate Prospective Adjustment
Correction of an Error Retrospective Adjustment


CKE Pass Rates

A CKE Pass Rate?

In a rare move, the ICAO has mentioned a pass rate for the CKE on it’s web site. Perhaps this was there last year but I never noticed it.

Generally, it is expected that about seventy-five to eighty per cent of those who attempt the examination will meet or exceed this standard.

This is in and around what most people thought anyway so it’s certainly not too noteworthy.


Competency Allocation

Also mentioned, and this has remained constant since at least 2009, the breakout of the number of questions per competency is as follows:

Governance, Strategy and Risk Management   5%
Performance Measurement and Reporting 25%
Assurance 30%
Finance 10%
Management Decision-Making 15%
Taxation 15%

Given that the CKE is 100 questions you can expect the exact number of questions as percentage on the exam. Each section will be well delineated so it’s not like you’ll be flipping around between an assurance question and then a PMR question.


Format Change?

There is also a note at the bottom of the web site:

Format For PMR

If there are any general questions on PMR on the exam they will be at the beginning of the PMR section. A general question is one that is not IFRS, ASPE or NFP specific i.e. what is the purpose of an income statement.  After the general questions  students will be instructed to answer the next set of questions using IFRS.  After the IFRS questions students will be instructed to answer the next set of questions using ASPE.  The final section will instruct students to answer that set of questions using NFP.

This seems to indicate that there might be further delineation with them letting you know which question is for IFRS vs. ASPE. This was not the case when I wrote in 2009 and there was only a PMR section. They informed us in the question, however.

Another reminder: the ICAO no longer allows you to bring in your own calculator.  This gorgeous hunk of technology will be provided for you!


CKE Calculator

Look at those curves.

Lastly, for all the technical (and at which level) you might be subjected to. It’s a good idea to review the UFE Candidates’ Competency Map for this year.

We’re coming up to the final month of your technical study so if you haven’t been studying a bit on your own already, it’s the perfect time to still get in some study after work. Remember, in the last three weeks of December, the goal will be to write exams so there won’t be much time to study your books.

A reminder, if you haven’t checked it out yet, CPA Formula is offering 500 CKE MC Questions which includes instantaneous comparison to other candidates. Price is $97 and use coupon code UFEBLOG to get a further discount.

Back soon

Just a quick hello to let everybody know we’re still around!

I’ve been a lot busier than anticipated in some other projects but working on some content for next week so stay tuned 🙂

Modern Tools for the Core Knowledge Exam (CKE)

Today’s post is a sponsored guest post produced by CA Formula.

Welcome to the start of the 2014 UFE process! There’s no doubt that you’re probably a little nervous about the whole thing – don’t worry – that’s normal. This is probably your first big professional exam.

If you’re a candidate writing in Ontario, your first hurdle will be to clear the Core Knowledge Exam, more casually called the CKE. You might be taking a course or you might be doing a self-study program. Both are great options but the most important part of getting through the CKE is practicing on plenty of multiple choice questions across all the competency areas and then learning from the solutions.

Beginning November 1st, CA Formula is excited to bring you 500 multiple choice questions the modern way.

What do we mean by the modern way?

No longer do you have to bother printing hundreds of pages of questions and solutions. CA Formula provides everything online, instantly.

No longer do you have to wonder how other candidates are performing. CA Formula tells you instantly how all other candidates who have completed the multiple choice exam have performed. You can instantly compare your results on a competency or overall exam basis. Understanding where most candidates have trouble right away will help reduce your stress and motivate you to focus on those areas and improve.

Want to learn more about studying for the CKE the modern way?

CA Formula is the first of its kind to offer a complete preparatory program to candidates online.

The CA Formula prep program also includes complete online technical summaries for all six competency areas and new this year, CA Formula is also offering a live chat service with a professional marker CA.

Come visit CA Formula to learn more, we’ll be happy to answer any questions you have. As a UFE Blog reader, we’re also giving you 5% off if you use the coupon code UFEBLOG when you sign up.

Sponsored posts are content that has been produced by a company, which is either paying for the post or has a business relationship with UFE Blog, and they’re always clearly marked. The content of regular posts produced by UFE Blog are never influenced by advertisers or sponsors in any way.

Core Knowledge Exam (CKE Exam) Resources

Many of you will no doubt have recently started your prep courses for the CKE. If you haven’t yet, it’s probably a good time to get down to it. There’s a lot of technical to review so don’t wait too long.

I’ve been thinking whether or not there are any new CKE advice I should write and I think it’s all been pretty well covered so instead I’m just going to point you in the right directions and we’ll keep beefing up the technical here in the future. If there’s any CKE questions you have or would like to see a topic covered don’t be shy and let us know in the comments!

One Core Knowledge Exam (CKE) Study Strategy – This article reviews the CKE space – what’s out there for material and how people typically study for the CKE.

How to study for the CKE – Alone, group or something else? – This article discuses some of the ways you might want to study for the CKE, which is a very personal exam.

And remember. Save the multiple choice questions until December. I’ll dig into this a little more down the road because it’ll be important to understand that certain exams have different purposes than others.

Planning your Study Time for the CKE and UFE

For the next few months, UFE Blog will be focusing on upping your technical game and getting candidates ready for the ICAO’s CKE exam (the most technical of the Ontario exams) and at the same time providing more technical study guides for the remaining candidates.

Please pardon the slow pace here lately – I’ve been working on a lot of things in the background for the blog and also pretty busy with a few other non-blog priorities. I’ll be back on track soon by November.

In the meantime, I’m happy to announce to you that Gus Patel, a recent UFE writer, has graciously offered to beef up some of the sections of this blog that have been neglected. You’ll be seeing some posts from Gus mixed in with my own in the future. I’ll let Gus introduce himself shortly. Thanks Gus!

In the meantime, here are your priorities as 2014 CKE (and UFE!) writers:

  1. Get your technical study plan in order and… start! Whether you are taking a course or not, October – December is a great time to build a solid foundation. Most of you will be too busy after January begins and if you’re writing the CKE in January, you really have no choice.
  2. If you’re writing the CKE, you’ll need to practice writing CKE multiple choice questions. Save this until December. There is a limited amount of questions out there and you don’t want to use them up too early. Your last two or three weeks in December prior to the CKE is when you want to tackle these.

That said, we will dive into both of these topics in more detail very soon but I wanted to make sure people get on the right track at this critical time. As it’s a lot of people’s first professional exam, the CKE can feel the scariest.

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