Is change in inventory valuation method is a change in accounting estimate or an accounting policy?
Before we establish whether it is a change in accounting policy or a change in accounting estimate, lets understand what constitutes a change in accounting policy and accounting estimate. According to IAS 8 a change in accounting estimate is: An adjustment in the following that results from the assessment on the basis of present and […]
How can we change the Depreciation method?
Most of the non-current assets held by the entities require depreciation because of use devaluation as a result of use of the asset in business operations or other factors. Many different depreciation methods can be used by the entities to record the effect of devaluation. However, IAS 16 Property, Plant and Equipment requires that: In […]
What are the Elements of Financial Statements?
The main purpose of financial statements is to provide financial information to the users to assist them in their economic decisions. The financial statements basically present the financial information in such form that it is not only understandable but also useable. That is why financial statements present the financial effects of different business events that […]
What is FISH inventory method?
FISH is the acronym for First-in, Still-here and is basically an alternative name for Last-in, First-out (LIFO) method. Usually authors and article writers come up with novel terms sometimes to make things even more understandable or sometimes just to make fun. So FISH terminology for LIFO system might just be the similar kind of case. […]
What is LISH inventory method?
LISH is the acronym for Last-in, Still-here and is basically just another name given to First-in, First-out (FIFO) method which is a well known inventory valuation method based on particular cost flow assumption. Different authors sometime coin new terms, this might be one of them. As FIFO is the widespread term and is also used […]
What is the recognition criteria of equity?
Framework for Preparation and Presentation of Financial Statements (Framework) issued by International Accounting Standards Board (IASB) is one of the important documents. Many of the basic concepts that also form the very foundation of International Accounting Standards (IASs) have been discussed in it and provides a framework for development of accounting standards as well. Although […]
Why residual value (salvage value) is not allocated to the useful life of a depreciable asset?
Scrap value or salvage value or residual value is the value which we expect to receive by selling an asset at the end of its useful life. So basically it is the monetary value of the economic benefits that will be recovered from the asset by selling the asset and not through use of the […]
Is cash a tangible asset or an intangible asset?
In order to check the status of an asset whether it relates to a particular class or not, it is always a good idea that we go for the definitions provided in the relevant pronouncements first as they give the criteria whether a certain asset can be classified in one way or not. In this […]
What is HIFO?
HIFO is an acronym for Highest in, First out. This inventory valuation method assumes that inventory with highest bought in value i.e. highest purchase price in the stock will be consumed first or in other words will be sent out to production hall at first place. One of the main advantage of using HIFO method […]
What are the important Qualitative characteristics of Financial Statements?
As we understand that different users require financial information for assistance in their economic decisions. Entities publish financial statements so that users can get their information needs fulfilled. The dependence of users’ economic decision on financial statements is crucial and if the financial information is not accurate or is not true and fair then users […]
