Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies

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....disclosure of certain items in the statement of profit and loss so that all enterprises prepare and present such a statement on a uniform basis. This enhances the comparability of the financial statements of an enterprise over time and with the financial statements of other enterprises. Accordingly, this Standard requires the classification and disclosure of extraordinary and prior period items, and the disclosure of certain items within profit or loss from ordinary activities. It also specifies the accounting treatment for changes in accounting estimates and the disclosures to be made in the financial statements regarding changes in accounting policies. Scope 1. This Standard should be applied by an enterprise in presenting profit or....

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....c accounting principles and the methods of applying those principles adopted by an enterprise in the preparation and presentation of financial statements. Net Profit or Loss for the Period 5. All items of income and expense which are recognised in a period should be included in the determination of net profit or loss for the period unless an Accounting Standard requires or permits otherwise. 6. Normally, all items of income and expense which are recognised in a period are included in the determination of the net profit or loss for the period. This includes extraordinary items and the effects of changes in accounting estimates. 7. The net profit or loss for the period comprises the following components, each of which should be di....

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....as an extraordinary item for an insurance enterprise that insures against such risks. 11. Examples of events or transactions that generally give rise to extraordinary items for most enterprises are:- -attachment of property of the enterprise; -or an earthquake.  Profit or Loss from Ordinary Activities 12. When items of income and expense within profit or loss from ordinary activities are of such size, nature or incidence that their disclosure is relevant to explain the performance of the enterprise for the period, the nature and amount of such items should be disclosed separately. 13. Although the items of income and expense described in paragraph 12 are not extraordinary items, the nature and amount of such items may....

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.... more prior periods. The term does not include other adjustments necessitated by circumstances, which though related to prior periods, are determined in the current period, e.g., arrears payable to workers as a result of revision of wages with retrospective effect during the current period. 17. Errors in the preparation of the financial statements of one or more prior periods may be discovered in the current period. Errors may occur as a result of mathematical mistakes, mistakes in applying accounting policies, misinterpretation of facts, or oversight. 18. Prior period items are generally infrequent in nature and can be distinguished from changes in accounting estimates. Accounting estimates by their nature are approximations that may....

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....nguish between a change in an accounting policy and a change in an accounting estimate. In such cases, the change is treated as a change in an accounting estimate, with appropriate disclosure. 23. The effect of a change in an accounting estimate should be included in the determination of net profit or loss in:      (a) the period of the change, if the change affects the period only; or      (b) the period of the change and future periods, if the change affects both.  24. A change in an accounting estimate may affect the current period only or both the current period and future periods. For example, a change in the estimate of the amount of bad debts is recognised immediately and there....

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....d cash flows. Therefore, the same accounting policies are normally adopted for similar events or transactions in each period. 29. A change in an accounting policy should be made only if the adoption of a different accounting policy is required by statute or for compliance with an accounting standard or if it is considered that the change would result in a more appropriate presentation of the financial statements of the enterprise. 30. A more appropriate presentation of events or transactions in the financial statements occurs when the new accounting policy results in more relevant or reliable information about the financial position, performance or cash flows of the enterprise. 31. The following are not changes in accounting polici....