Accountancy Forum

Hi everybody,
i want to know about the accounting policy regarding the stock valuation, suppose if the company has the accounting policy regarding its Raw Material Stock "Average cost", and if the company previously valuing its stock on Annual Average Basis, now if the company changes its policy, from Annual to Monthly Basis, then what should we treat it ? is it change in accounting policy or is it change in accounting estimate ??? or it is not the either of both changes ??
furthermore, can anybody give reference of financial statements of any company who has made the disclosures in accordance with IAS-8, similar to the situation which i have mentioned????

S M R

Change from an annual average pricing to monthly averge pricing is a change in accounting policy.

I believe the change is material as it will continue to affect the future years stock valuation hence needs disclosing.

If the effects of this change has material impact on the profits, you should consider the need of restating last years comparatives.

This is my opinion only, plese make your own judgements for the purpose of any reporting or advising clients.

Thanx Zubair,
but in my opinion, (As per IAS 8) it is not a change in accounting policy, its a change in accounting estimate, dont u think so,
if we change our policy from Avg. to Lifo or Fifo, then it should be considered as Change in Acc. Policy,
however in both cases, we have comply with IAS 8,

actually i need some reference from Financial Statements of any company, who complied with the requirements of IAS 8.

S M R

I must say that I am not very good in IAS as I passed my exams under UK SAS,GAAPS and FRS's. however my restricted knowledge of IAS seems to suggest that when you value the stock its not an estimate of price we use, its a factual incidence. When we change from Avg. to LIFO, you said, its change in policy. Whataabout if we change from avg. to weighted avg. of last one month, its again change in policy.
Secondly, from regulatory aspect, management may try to variate the stock valuation by changing the pricing method (in this case weighted avg. of last month). if they do that, then for the reasons of consistency comparatives needs restating. Comparatives can only be restated if change in accounting policy.
If We take it as a change in estimate, then comparatives dont need restateing and it could impair the financial statements view.

I you want to see how change in accounting policy and restatement is disclosed. please visit one of the listed company website and see their online financial statements.
I am sure ICEAW or ACCA website has guidence on this topic,]

Best of luck