Like US GAAP, IFRS requires that changes in accounting principles to be reported on a retrospective

basis, which involves adjusting prior period financial statements to reflect the change.
In keeping with the accounting principle of conservatism, whenever it is impossible to determine
whether a change in accounting estimate or a change in accounting principle has occurred, the
change should be considered a change in estimate.
A change from completed-contract to percentage-of-completion is a change in accounting principle
that is given retrospective application. The carrying value of assets and liabilities are adjusted as of
the beginning of the earliest period presented with an offset to retained earnings.
A prior-year error will normally result in adjustments to the affected asset and liability accounts as of
the beginning of the current year and also a prior period adjustment to beginning retained earnings.
Additionally, when comparative financial statements are being issued, all prior years affected by the
error are restated directly.
A change in the method of accounting for long-term construction contracts is a change in accounting
principle and is given retrospective treatment.
A change from the straight-line method of depreciation for previously recorded assets to the doubledeclining balance method is a change in accounting principle that cannot be distinguished from a
change in accounting estimate. As a result, it is accounted for prospectively as a change in
accounting estimate.
A change from the individual item approach to the group approach in evaluating the lower of cost or
market price of inventory is a change in the method of applying an accounting principle, which is
accounted for retrospectively as a change in accounting policy.
A change from the income tax basis of accounting to the accrual basis is a change in accounting
principle and is accounted for retrospectively, requiring restatement of prior periods presented as if
the new principle had been applied in previous periods. A change in warranty obligation is a change
in estimate, reported prospectively without affecting prior periods.
A change in reporting entity is recognized retrospectively by restating the financial statements for all
periods presented as if the change had already occurred as of the beginning of the earliest period
presented.
A correction of an error, such as a mathematical error in the calculation of a prior years
depreciation, is accounted for retrospectively as a prior period adjustment, requiring certain
disclosures.
Under IFRS, the disclosures accompanying a correction of an error will include a description of the
nature of the error and the impact on the financial statements. The impact will include the correction
made as of the beginning of the earliest period presented and the impact on primary and diluted
earnings per share for each period presented.

IFRS allows a change in an accounting in one of two circumstances. It is permitted if the change is
required by an IFRS or if the change will result in financial statements that are reliable more relevant.