This a standard directly applicable, you then consider standards

This
memo is to explain the requirements of IAS8 and also what it is. IAS8 deals
with selecting and applying accounting policies correctly, as well as also
accounting for those specific accounting policies, accounting for any changes
in accounting estimates and also how to correct any mistakes or errors that
have been made in financial periods from the past.

The
accounting policies are principles, rules and practices that are used when an
entity is preparing and presenting its financial statements. This is to make
sure that, providing they follow the same rules every year, there are no
comparability issues when they are looking to compare their financial
statements at the end of every financial period. The policies chosen by the
entity must first of all be the correct standard for the transaction at hand.

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If there isn’t a standard directly applicable, you then consider standards that
are particularly similar to the issue at hand. Changes can be made to the
accounting policies as aforementioned; however, there are only two ways in which
this can happen. The first is if a standard requires you to change the policy
and the second way is if it makes the results in the financial statements
present information that is more relevant. Any changes made to accounting
policies are then applied retrospectively. This does mean that any previous
years must be changed to coincide with the new policy and any future statements
should also follow this standard.

Changes
in accounting estimates occur when the carrying amount on the assets or
liabilities are adjusted via revaluation or depreciation. These changes in
estimates are applied prospectively as opposed to retrospectively like the
changes in accounting policies. This does mean that although previous years remain
the same as they are, the changes do affect the figures for the current year
and any following years.

Prior
period errors are errors made while preparing the financial statements. These
errors are often due to human or mathematical mistakes, whether that is through
omitting something from the statements or just a general mistake when doing the
calculations. The requirements of IAS8 state that financial statements must be
free of errors of any kind. Touched on in IAS1, it is important to consider
that materiality is a factor when the errors are being fixed. Materiality is
the concept that anyone who may wish to look at or use the financial statements
should not have there decisions affected by the errors, if the error may affect
their decision, it is material. The reason this is of relevance is because any
error that is not material does not need to be corrected retrospectively. However,
any material errors must be corrected retrospectively.