SFRS(I) 1-8 sets out the criteria for selecting and changing accounting policies, and the accounting treatment and disclosure of changes in accounting policies, changes in accounting estimates, and corrections of errors. The distinction it draws — between a change in policy (applied retrospectively), a change in estimate (applied prospectively), and the correction of an error (corrected retrospectively) — is fundamental to how financial statements maintain comparability over time. It is the Singapore equivalent of IAS 8 under IFRS, and is in substance IAS 8 as applied in Singapore.
Objective and scope
The objective is to prescribe the criteria for selecting and changing accounting policies, together with the accounting treatment and disclosure of changes in policies, changes in estimates, and corrections of prior period errors — enhancing the relevance and reliability of financial statements and their comparability over time and with other entities.
Accounting policies
Accounting policies are the specific principles, bases, conventions, rules, and practices applied in preparing and presenting financial statements. When an SFRS(I) specifically applies to a transaction, the policy is determined by applying that SFRS(I). In the absence of a specific standard, management uses judgement to develop a policy that results in relevant and reliable information, referring first to SFRS(I) dealing with similar issues, and then to the Conceptual Framework. Policies are applied consistently for similar transactions.
Changes in accounting policies
An entity changes an accounting policy only if the change is required by an SFRS(I), or results in reliable and more relevant information. A change in accounting policy is generally applied retrospectively — adjusting the opening balance of each affected component of equity for the earliest prior period presented, and the other comparative amounts, as if the new policy had always been applied. (A change required by a standard with specific transitional provisions follows those provisions.)
Changes in accounting estimates
A change in accounting estimate is an adjustment of the carrying amount of an asset or liability, or the periodic consumption of an asset, resulting from new information or new developments — for example, changes in estimates of bad debts, inventory obsolescence, the useful lives of assets, or warranty obligations. The effect is recognised prospectively — in profit or loss in the period of the change (and future periods, if affected). Prior periods are not restated. This is the key contrast with a change in policy.
Prior period errors
Prior period errors are omissions from, and misstatements in, the financial statements for one or more prior periods arising from a failure to use, or misuse of, reliable information that was available and could reasonably have been obtained. An entity corrects material prior period errors retrospectively in the first financial statements authorised for issue after their discovery — by restating the comparative amounts for the prior period(s) in which the error occurred, or, if earlier, restating the opening balances for the earliest prior period presented.
A worked example — three situations, three treatments
The three concepts look similar but are treated in three different ways. Consider a Singapore company facing all three in the same year:
| Situation | Which category | Treatment |
|---|---|---|
| Revises a machine's useful life from 10 years to 8 years based on new wear information | Change in estimate | Prospective — adjust depreciation over the remaining life; do not restate prior years |
| Changes inventory cost formula from weighted average to FIFO because FIFO gives more relevant information | Change in policy | Retrospective — restate comparatives as if FIFO had always been used |
| Discovers a supplier invoice was omitted from last year's accounts | Prior period error | Retrospective — restate the prior-year comparatives to correct the error |
The pattern to remember: a change in estimate looks forward only (prospective); a change in policy and the correction of an error both look backward (retrospective restatement of comparatives).
How SFRS(I) 1-8 relates to IFRS
SFRS(I) 1-8 is identical to IAS 8 under IFRS — the same hierarchy for selecting policies, the same retrospective treatment for policy changes, the same prospective treatment for estimate changes, and the same retrospective correction of prior period errors. An entity familiar with IAS 8 will find SFRS(I) 1-8 to be the same standard.
Common pitfalls
Recurring issues include treating a change in accounting policy prospectively (it should generally be retrospective), or a change in estimate retrospectively (it should be prospective); misclassifying a correction of an error as a change in estimate to avoid restating comparatives; changing a policy without it being required by an SFRS(I) or resulting in more relevant and reliable information; and inadequate disclosure of the nature and effect of a change or error correction.
Why this is cleaner on a unified system
Applying changes in policy, changes in estimate, and error corrections correctly — including the retrospective restatement of comparatives — is more reliable when the underlying data and prior-period figures can be produced consistently from one connected system. When the accounts sit in a single source of truth, restating comparatives for a policy change or error correction, and applying an estimate change prospectively, is more straightforward than reconciling figures assembled from separate tools.
This article is a detailed educational summary of SFRS(I) 1-8 in plain language. It is not a substitute for the full text of the standard. Accounting standards are amended from time to time; always verify the current, authoritative text of SFRS(I) 1-8 as issued by the Singapore Accounting Standards Council before relying on it, and consult a qualified professional accountant for application to your specific circumstances.