Guide to selecting and applying accounting policies

Keywords: Mazars, Thailand, IFRS, IAS 8, Financial Statements, IAS 1

9 March 2020

The guide, which is based on work by the IASB and the IFRS Interpretations Committee, sets out three key steps (based on the requirements of IAS 8) for selecting and applying accounting policies for a transaction, another event or a condition:

• Step 1: does an IFRS standard specifically apply to the transaction, other event or condition? If yes, the entity shall apply the requirements of that standard, even if they contradict the Conceptual Framework.
• Step 2: if there is no IFRS standard that specifically applies to the transaction, other event or condition, do any IFRS standards include requirements for similar or related issues? If yes, the entity shall apply these requirements. The guide specifies that preparers shall use their judgement on whether to apply all aspects of a standard that are applicable to a particular issue (including disclosure requirements, where relevant). In other words, in some cases it may not be appropriate to apply only some requirements of an IFRS standard that deals with similar or related issues, if there are other requirements in that standard that also relate to the transaction for which the accounting policy is being developed. In other cases, it may not be necessary to apply all the requirements of the standard.
• Step 3: if there is no IFRS standard that deals with similar or related issues, preparers shall consider the applicability of the definitions, recognition criteria and measurement concepts for assets, liabilities, income and expenses set out in the Conceptual Framework.

For each step, the guide provides one or more illustrative examples (for step 1, it provides an example relating to the classification of a financial instrument with no contractual obligation to deliver cash or another financial asset, to show that IAS 32 applies as a priority).

Finally, the guide reminds preparers that in situations where no IFRS standard applies specifically to a given transaction (and there are thus no disclosure requirements that apply specifically to that transaction), IAS 1 lists general disclosure requirements that must be met in addition to any disclosure requirements included in standards dealing with similar or related issues (if these are deemed to apply to the transaction in question).

The guide is available here.