IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors
Standard 2021 Issued


IAS 8 prescribes the criteria for selecting and changing accounting policies, together with the accounting treatment and disclosure of changes in accounting policies, changes in accounting estimates and corrections of errors. Accounting policies are the specific principles, bases, conventions, rules and practices applied by an entity in preparing and presenting financial statements. When an IFRS Standard or IFRS Interpretation specifically applies to a transaction, other event or condition, an entity must apply that Standard.

In the absence of an IFRS Standard that specifically applies to a transaction, other event or condition, management uses its judgement in developing and applying an accounting policy that results in information that is relevant and reliable. In making that judgement management refers to the following sources in descending order:

  • the requirements and guidance in IFRS Standards dealing with similar and related issues; and
  • the definitions, recognition criteria and measurement concepts for assets, liabilities, income and expenses in the Conceptual Framework.

Changes in an accounting policy are applied retrospectively unless this is impracticable or unless another IFRS Standard sets specific transitional provisions.

Changes in accounting estimates result from new information or new developments and, accordingly, are not corrections of errors. The effect of a change in an accounting estimate is recognised 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.

Prior period errors are omissions from, and misstatements in, the entity’s financial statements for one or more prior periods arising from a failure to use, or misuse of, available reliable information. Unless it is impracticable to determine the effects of the error, an entity corrects material prior period errors retrospectively by restating the comparative amounts for the prior period(s) presented in which the error occurred.

Standard history

In April 2001 the International Accounting Standards Board (Board) adopted IAS 8 Net Profit or Loss for the Period, Fundamental Errors and Changes in Accounting Policies, which had originally been issued by the International Accounting Standards Committee in December 1993. IAS 8 Net Profit or Loss for the Period, Fundamental Errors and Changes in Accounting Policies replaced IAS 8 Unusual and Prior Period Items and Changes in Accounting Policies (issued in February 1978).

In December 2003 the Board issued a revised IAS 8 with a new title—Accounting Policies, Changes in Accounting Estimates and Errors. This revised IAS 8 was part of the Board’s initial agenda of technical projects. The revised IAS 8 also incorporated the guidance contained in two related Interpretations (SIC‑2 Consistency—Capitalisation of Borrowing Costs and SIC‑18 Consistency—Alternative Methods).

In October 2018 the Board issued Definition of Material (Amendments to IAS 1 and IAS 8). This amendment clarified the definition of material and how it should be applied by (a) including in the definition guidance that until now has featured elsewhere in IFRS Standards; (b) improving the explanations accompanying the definition; and (c) ensuring that the definition of material is consistent across all IFRS Standards.

Other Standards have made minor consequential amendments to IAS 8. They include IFRS 13 Fair Value Measurement (issued May 2011), IFRS 9 Financial Instruments (Hedge Accounting and amendments to IFRS 9, IFRS 7 and IAS 39) (issued November 2013), IFRS 9 Financial Instruments (issued July 2014) and Amendments to References to the Conceptual Framework in IFRS Standards (issued March 2018).

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