Contents

paragraphs
INTRODUCTION IN1-IN18

Financial Reporting Standard 108

Accounting Policies, Changes in Accounting
Estimates and Errors

OBJECTIVE 1-2

SCOPE 3-4

DEFINITIONS 5-6

ACCOUNTING POLICIES 7-31

Selection and Application of Accounting Policies 7-12

Consistency of Accounting Policies 13

Changes in Accounting Policies 14-31

Applying Changes in Accounting Policies 19-27

Retrospective application 22

Limitations on retrospective application 23-27

Disclosure 28-31

CHANGES IN ACCOUNTING ESTIMATES 32-40

Disclosure 39-40

ERRORS 41-49

Limitations on Retrospective Restatement 43-48

Disclosure of Prior Period Errors 49

IMPRACTICABILITY IN RESPECT OF RETROSPECTIVE

APPLICATION AND RETROSPECTIVE RESTATEMEN 50-53

EFFECTIVE DATE 54

WITHDRAWAL OF OTHER PRONOUNCEMENTS 55-56

Style

Additions to IFRSs are clearly identified and would be made in a manner that
preserves the format and structure of the IFRSs.

If a new paragraph is added, that paragraph would be labelled with the preceding
paragraph number followed by a capitalised alphabet and the word "added" is
included at the right side of the paragraph. If a paragraph is deleted, the text
would be marked as deleted text by the inclusion of the word "deleted" at the
right side of the paragraph and the reason for the deletion is explained at the
end of the paragraph. [New paragraph or deleted paragraph without the
indication of "added" or "deleted" at the right side of the paragraph is
amendments made by the IASB.]

Additions or deletions made within the paragraph in IFRSs would be shaded and
underlined or struck through respectively. [Those additions and deletions which
are underlined or struck through without shading are amendments made by the
IASB.]

Financial Reporting Standard 108 Accounting Policies, Changes in Accounting

Estimates and Errors (FRS 108) is set out in paragraphs 1-56. All the paragraphs
have equal authority. FRS 108 should be read in the context of its objective and
the Basis for Conclusions, theForeword to Financial Reporting Standards and
the Proposed Framework for the Preparation and Presentation of Financial
Statements.
Introduction

IN1. Financial Reporting Standard 108 Accounting Policies, Changes in

Accounting Estimates and Errors (FRS 108) replaces FRS 1082004 Net Profit
or Loss for the Period, Fundamental Errors and Changes in Accounting
Policies and should be applied for annual periods beginning on or after 1
January 2006. Earlier application is encouraged. The Standard also replaces
the following Interpretations:

- SIC-2 Consistency-Capitalisation of Borrowing Costs

- SIC-18 Consistency-Alternative Methods

[Reason: MASB has not adopted SIC-2 and SIC-18.]

IASB's Reasons for Revising IAS 8

IN2. The International Accounting Standards Board developed the revised IAS 8
as part of its project on Improvements to International Accounting
Standards. The project was undertaken in the light of queries and criticisms
raised in relation to the Standards by securities regulators, professional
accountants and other interested parties. The objectives of the project
were to reduce or eliminate alternatives, redundancies and conflicts within
the Standards, to deal with some convergence issues and to make other
improvements.

IN3. For IAS 8, the IASB's main objectives were:

(a) to remove the allowed alternative to retrospective application of

voluntary changes in accounting policies and retrospective
restatement to correct prior period errors;

(b) to eliminate the concept of a fundamental error;

(c) to articulate the hierarchy of guidance to which management refers,

whose applicability it considers when selecting accounting policies in
the absence of Standards and Interpretations that specifically apply;

(d) to define material omissions or misstatements, and describe how to

apply the concept of materiality when applying accounting policies
and correcting errors; and

(e) to incorporate the consensus in SIC-2 Consistency - Capitalisation of

Borrowing Costs and in SIC-18 Consistency -Alternative Methods.

IN4. The IASB did not reconsider the other requirements of IAS 8.

Changes from Previous Requirements

IN5. The main changes from FRS 1082004 are described below.

Selection of Accounting Policies

IN6. The requirements for the selection and application of accounting policies in
FRS 1012004 Presentation of Financial Statementshave been transferred to
the Standard. The Standard updates the previous hierarchy of guidance to
which management refers and whose applicability it considers when
selecting accounting policies in the absence of Standards and
Interpretations that specifically apply.

Materiality

IN7. The Standard defines material omissions or misstatements. It stipulates

that:

(a) the accounting policies in Financial Reporting Standards (FRSs) need

not be applied when the effect of applying them is immaterial. This
complements the statement in FRS 101 that disclosures required by
FRSs need not be made if the information is immaterial.

(b) financial statements do not comply with FRSs if they contain material
errors.

(c) material prior period errors are to be corrected retrospectively in the

first set of financial statements authorised for issue after their
discovery.

Voluntary Changes in Accounting Policies and Corrections of Prior

Period Errors

IN8. The Standard requires retrospective application of voluntary changes in

accounting policies and retrospective restatement to correct prior period
errors. It removes the allowed alternative in FRS 1082004:

(a) to include in profit or loss for the current period the adjustment
resulting from changing an accounting policy or the amount of a
correction of a prior period error; and

(b) to present unchanged comparative information from financial

statements of prior periods.

IN9. As a result of the removal of the allowed alternative, comparative

information for prior periods is presented as if new accounting policies had
always been applied and prior period errors had never occurred.

Impracticability

Costs of purchase

IN10. The Standard retains the 'impracticability' criterion for exemption from
changing comparative information when changes in accounting policies are
applied retrospectively and prior period errors are corrected. The Standard
now includes a definition of 'impracticable' and guidance on its
interpretation.

IN11. The Standard also states that when it is impracticable to determine the
 cumulative effect, at the beginning of the current period, of:

(a) applying a new accounting policy to all prior periods, or

(b) an error on all prior periods,

the entity changes the comparative information as if the new accounting

policy had been applied, or the error had been corrected, prospectively
from the earliest date practicable.

Fundamental Errors

IN12. The Standard eliminates the concept of a fundamental error and thus the
distinction between fundamental errors and other material errors. The
Standard defines prior period errors.

Disclosures

IN13. The Standard now requires, rather than encourages, disclosure of an

impending change in accounting policy when an entity has yet to
implement a new Standard or Interpretation that has been issued but not
yet come into effect. In addition, it requires disclosure of known or
reasonably estimable information relevant to assessing the possible impact
that application of the new Standard or Interpretation will have on the
entity's financial statements in the period of initial application.

IN14. The Standard requires more detailed disclosure of the amounts of

adjustments resulting from changing accounting policies or correcting prior
period errors. It requires those disclosures to be made for each financial
statement line item affected and, if FRS 133 Earnings per Share applies to
the entity, for basic and diluted earnings per share.

Other Changes

IN15. The presentation requirements for profit or loss for the period have been
transferred to FRS 101.

IN16. The Standard incorporates the consensus in IASB SIC-18 Consistency -

Alternative Methods, namely that:

(a) an entity selects and applies its accounting policies consistently for
similar transactions, other events and conditions, unless a Standard
or an Interpretation specifically requires or permits categorisation of
items for which different policies may be appropriate; and

(b) if a Standard or an Interpretation requires or permits such

categorisation, an appropriate accounting policy is selected and
applied consistently to each category.

The consensus in IASB SIC-18 incorporated the consensus in IASB SIC-

2 Consistency - Capitalisation of Borrowing Costs, and requires that when
an entity has chosen a policy of capitalising borrowing costs, it should
 apply this policy to all qualifying assets.

IN17. The Standard includes a definition of a change in accounting estimate.

IN18. The Standard includes exceptions from including the effects of changes in
accounting estimates prospectively in profit or loss. It states that to the
extent that a change in an accounting estimate gives rise to changes in
assets or liabilities, or relates to an item of equity, it is recognised by
adjusting the carrying amount of the related asset, liability or equity item
in the period of the change.

Financial Reporting Standard 108

Accounting Policies,
Changes in Accounting Estimates and Errors

Objective

1. The objective of this Standard is to prescribe 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. The Standard is intended to enhance
the relevance and reliability of an entity's financial statements, and the
comparability of those financial statements over time and with the financial
statements of other entities.

2. Disclosure requirements for accounting policies, except those for changes

in accounting policies, are set out in FRS 101Presentation of Financial
Statements.

Scope

3. This Standard shall be applied in selecting and applying

accounting policies, and accounting for changes in accounting
policies, changes in accounting estimates and corrections of prior
period errors.

4. The tax effects of corrections of prior period errors and of retrospective

adjustments made to apply changes in accounting policies are accounted
for and disclosed in accordance with FRS 1122004 Income Taxes.

Definitions

5. The following terms are used in this Standard with the meanings
specified:

Accounting policies are the specific principles, bases, conventions,

rules and practices applied by an entity in preparing and
presenting financial statements.

A change in accounting estimate is an adjustment of the carrying

amount of an asset or a liability, or the amount of the periodic
consumption of an asset, that results from the assessment of the
present status of, and expected future benefits and obligations
associated with, assets and liabilities. Changes in accounting
estimates result from new information or new developments and,
accordingly, are not corrections of errors.

International Financial Reporting Standards (IFRSs) are delet

Standards and Interpretations adopted by the ed
International Accounting Standards Board (IASB). They
comprise:

(a) International Financial Reporting Standards;

- Consequential Amendments to FRS 1072004 Cash Flow Statements

- Consequential Amendments to FRS 1122004 Income Taxes

- Consequential Amendments to FRS 1142004 Segment Reporting

- Consequential Amendments to FRS 1192004 Employee Benefits

- Consequential Amendments to FRS 1202004 Accounting for Government Grants

and
Disclosure of Government Assistance

- Consequential Amendments to FRS 1342004 Interim Financial Reporting

- Consequential Amendments to FRS 1372004 Provisions, Contingent Liabilities

and Contingent Assets