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SFAS No.
8 Accounting Policies, Changes in Accounting Estimates
and Errors |
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 Status |
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Revised by
the Financial Accounting Standards Committee in Taiwan on
December 31, 1986 |
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Summary |
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The purpose of this Statement is to
establish the accounting standards for accounting |
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changes and prior period adjustments. |
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Change in accounting principle (the cumulative
effect in the income statement) |
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A change in accounting principle,
except for those described in the section of prior |
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period adjustment below, should be
recognized on the following basis: |
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(a) |
The amount
of the cumulative effect resulting from the change to a new |
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accountingprinciple should be
calculated,and
shown in the income statement |
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between the captions Extraordinary
Items and Net Income. |
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(b)
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The effect of adopting the new
accounting principle on income before |
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extraordinary
items and on net income of the period of the change should be
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disclosed. |
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(c)
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Financial
Statements for prior periods included for comparative purposes
should
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be presented
as previously reported. However, income before extraordinary items
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and net income
computed on a pro forma should be shown on the face of the |
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income statement
for all period presented as if the newly adopted accounting |
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principle had been
appliedduring all periods affected. |
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(d)
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The nature of the change in accounting
principle and the reason that the new |
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principle is
preferable to the original should be disclosed in the footnotes. |
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Change in accounting principle
(without the cumulative effect)
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For all types of changes in accounting
principle that do not result in a cumulative |
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effect, its effect on income before
extraordinary items and net income of the period of
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the change should be disclosed. The
nature of the change in method should also be
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described.
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Change in accounting principle
(unable to calculate the cumulative effect) |
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When calculating the cumulative effect
of a change in accounting is impossible, the
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cumulative effect may not be
calculated. However, the effect of the change on the
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net income for the period in which the
change occurred and the reason for omitting the |
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accounting for the cumulative effect
should be disclosed.
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Change in accounting estimate
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The effect of a change in accounting
estimate should be recognized as follows: |
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(a) If
the change affects one period only, the effects should be recognized
in that |
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period.
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(b) If
the change affects both the period of change and future periods, the
effects
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should
be recognized in that period and the following periods. |
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Simultaneous change in
accounting principle and estimate |
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If a change in accounting estimate and
a change in accounting principle occur |
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simultaneously, and their effects are
separable, then the change in accounting
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principle should be processed first and the
change in accounting estimate should be |
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processed second. |
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When distinguishing between a change
in accounting principle and a change in
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accounting estimate is difficult, such
change should be considered as change in
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estimate.
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Prior period adjustments (error
correction)
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When errors of prior period income
items are discovered, corrections of errors should be
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treated as prior period adjustments.
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Prior period adjustments (change
in accounting principle)
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The adjustments of prior period income
and restatement of all prior period financial
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statements are required for the
following changes in accounting principle:
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(a) a
change from the LIFO inventory valuation method to another method;
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(b) a
change in the method of accounting for long-term construction-type
contracts;
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(c) a
change to and from the full cost method of accounting in the
extractive
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industries;
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(d) issuance
of financial statements by a business for the first time to
obtain
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additional equity;
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(e) a
change in accounting principles to comply with the newly issued
accounting
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principles. However, other regulations should be observed if the
committee has
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made
other announcements.
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Effective
date
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This statement becomes effective for
financial statements for the fiscal year ending on
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or after December 31, 1986.
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