Net Profit or Loss for the Period 89
Accounting Standard (AS) 5
Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies Contents
OBJECTIVE SCOPE DEFINITIONS NET PROFIT OR LOSS FOR THE PERIOD Extraordinary Items Profit or Loss from Ordinary Activities Prior Period Items Changes in Accounting Estimates CHANGES IN ACCOUNTING POLICIES Paragraphs 1-3 4 5-27 8-11 12-14 15-19 20-27 28-33
90 AS 5 (revised 1997)
Net Profit or Loss for the Period 85
Accounting Standard (AS) 5*
Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies [This Accounting Standard includes paragraphs set in bold italic type and plain type, which have equal authority. Paragraphs in bold italic type indicate the main principles. This Accounting Standard should be read in the context of its objective, the Preface to the Statements of Accounting Standards 1 and the ‘Applicability of Accounting Standards to Various Entities’ (See Appendix 1 to this Compendium).]
The objective of this Standard is to prescribe the classification and disclosure of certain items in the statement of profit and loss so that all enterprises prepare and present such a statement on a uniform basis. This enhances the comparability of the financial statements of an enterprise over time and with the financial statements of other enterprises. Accordingly, this Standard requires the classification and disclosure of extraordinary and prior period items, and the disclosure of certain items within profit or loss from ordinary activities. It also specifies the accounting treatment for changes in accounting estimates and the disclosures to be made in the financial statements regarding changes in accounting policies.
1. This Standard should be applied by an enterprise in presenting profit or loss from ordinary activities, extraordinary items and prior * A limited revision was made in 2001, pursuant to which paragraph 33 has been added in this standard (see footnote 2). The Standard was originally issued in November 1982 and was titled ‘Prior Period and Extraordinary Items and Changes in Accounting Policies’. Attention is specifically drawn to paragraph 4.3 of the Preface, according to which Accounting Standards are intended to apply only to items which are material. 1
Net Profit or Loss for the Period 91
period items in the statement of profit and loss, in accounting for changes in accounting estimates, and in disclosure of changes in accounting policies. 2. This Standard deals with, among other matters, the disclosure of certain items of net profit or loss for the period. These disclosures are made in addition to any other disclosures required by other Accounting Standards. 3. This Standard does not deal with the tax implications of extraordinary items, prior period items, changes in accounting estimates, and changes in accounting policies for which appropriate adjustments will have to be made depending on the circumstances.
4. The following terms are used in this Standard with the meanings specified: 4.1. Ordinary activities are any activities which are undertaken by an enterprise as part of its business and such related activities in which the enterprise engages in furtherance of, incidental to, or arising from, these activities. 4.2. Extraordinary items are income or expenses that arise from events or transactions that are clearly distinct from the ordinary activities of the enterprise and, therefore, are not expected to recur frequently or regularly. 4.3. Prior period items are income or expenses which arise in the current period as a result of errors or omissions in the preparation of the financial statements of one or more prior periods. 4.4. Accounting policies are the specific accounting principles and the methods of applying those principles adopted by an enterprise in the preparation and presentation of financial statements....
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