Definitions of Terms

Accounting policies

Specific principles, bases, conventions, rules, and practices adopted by an enterprise in preparing and presenting financial statements.

Change in accounting estimate

A revision of an accounting measurement based on new information, more experience, or subsequent developments. The use of reasonable estimates is an essential part of the financial statement preparation process and does not undermine their reliability. Since uncertainties are inherent in day-to-day business activities, revisions to such accounting estimates are an acceptable practice in the accounting process.

Change in accounting principle

A switch from one generally accepted accounting principle to another generally accepted accounting principle, including the methods of applying these principles.


The quality of information that enables users to identify similarities in and differences between two sets of economic phenomena.


Consistency refers to conformity from period to period with unchanging policies and procedures. It enhances the utility of financial statements to users by facilitating analysis and understanding of comparative accounting data.

Cumulative effect

The difference between the beginning retained earnings balance of the year in which the change is reported and the beginning retained earnings balance that would have been reported if the new principle had been applied retrospectively for all prior periods that would have been affected.


The effect on the financial statements that results from mathematical mistakes, mistakes in applying accounting principles, misinterpretations of facts, fraud, or oversights.

Fundamental error

An error that has such a significant effect on the financial statements of one or more prior periods that those financial statements can no longer be considered to have been reliable at the date of their issue.

Pro forma information

Financial information that is prepared on an "as if" basis. The disclosure of required numbers computed on the assumption that certain events have transpired. Where allowed alternative treatments are followed in lieu of the benchmark treatments established by IAS 8, additional pro forma information is to be presented.

Restatement of comparative financial information

The recasting of a prior period's balance sheet or income statement information where there has been a change in accounting policy or correction of a fundamental error and the benchmark treatment is followed.

Wiley Ias 2003(c) Interpretation and Application of International Accounting Standards
WILEY IAS 2003: Interpretation and Application of International Accounting Standards
ISBN: 0471227366
EAN: 2147483647
Year: 2005
Pages: 147 © 2008-2017.
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