Ind AS 8 Accounting Policies, Changes in Estimates and Errors: A Practitioner Guide for FY 2026-27
Ind AS 8 (Accounting Policies, Changes in Accounting Estimates and Errors) is the Indian Accounting Standard that prescribes how entities select accounting policies, account for changes in policies and estimates, and correct prior period errors.
The Ministry of Corporate Affairs notified Ind AS 8 via the Companies (Indian Accounting Standards) Rules, 2015. It became effective on a voluntary basis from 1 April 2015 and mandatory from Phase I of Ind AS implementation on 1 April 2016. Ind AS 8 supersedes AS 5 for companies applying Ind AS.
For FY 2026-27, Ind AS 8 remains critical for listed companies since the Securities and Exchange Board of India requires restated financial information when material errors or policy changes occur. Failure to comply with Ind AS 8 can trigger SEBI scrutiny or affect credit ratings.
Ind AS 8 at a Glance
Ind AS 8 sets out how companies select accounting policies and account for changes in those policies or estimates. It also governs the correction of prior period errors. The standard is essential for statutory auditors and finance teams preparing financial statements under the Indian Accounting Standards framework.
| Field | Value |
|---|---|
| Standard Number | Ind AS 8 |
| Full Name | Accounting Policies, Changes in Accounting Estimates and Errors |
| Issuing Body | ICAI (Accounting Standards Board) |
| Notified By | MCA, Companies (Indian Accounting Standards) Rules, 2015, dated 16 February 2015 |
| Effective Date | 1 April 2015 (voluntary), 1 April 2016 (mandatory Phase I) |
| Supersedes | AS 5 (Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies) for Ind AS-applicable entities |
| Equivalent Standard | AS 5 ↔ Ind AS 8 ↔ IAS 8 |
| Applies To | All companies required to follow Indian Accounting Standards. Ind AS 8 governs how an entity selects accounting policies, accounts for changes in accounting policies and estimates, and corrects errors in prior period financial statements. |
What is Ind AS 8: Accounting Policies, Changes in Accounting Estimates and Errors?
Ind AS 8 establishes principles for selecting accounting policies that produce relevant and reliable financial information. The standard requires entities to apply consistent policies unless a change is mandated by another standard or provides more relevant information. It also prescribes how to account for changes in estimates and correct prior period errors.
ICAI introduced Ind AS 8 as part of India's convergence with International Financial Reporting Standards. The standard aligns closely with IAS 8 issued by the International Accounting Standards Board but incorporates Indian regulatory context. It replaces the older guidance under AS 5 for companies adopting Indian Accounting Standards.
Finance controllers, CFOs, statutory auditors, CA Final students, and audit trainees regularly use this standard when preparing or reviewing annual financial statements.
Objective of Ind AS 8
- Prescribe criteria for selecting and changing accounting policies, together with the accounting treatment and disclosure of changes in accounting policies, changes in accounting estimates, and corrections of errors.
- Enhance the relevance, reliability, and comparability of an entity's financial statements over time and with other entities.
- Specify the disclosures required when policies change voluntarily or when material errors are corrected retrospectively.
The objective directly supports presenting a true and fair view as required by Section 129 of the Companies Act, 2013. By enforcing consistency while allowing justified improvements or corrections with adequate disclosure, it helps users make informed decisions based on comparable financial information.
Who Must Apply Ind AS 8?
Entities covered, applicability table
All companies required to follow Indian Accounting Standards must apply Ind AS 8. This includes:
| Category | Applicability Timeline |
|---|---|
| Listed companies (Phase I) | Mandatory from FY 2016-17 |
| Unlisted companies ≥ Rs 250 crore net worth | Mandatory from FY 2017-18 |
| Other eligible companies opting voluntarily | Voluntary from FY 2015-16 |
Group reporting entities such as parent-subsidiary groups must also ensure consistent application across all components consolidated under Schedule III to the Companies Act.
Scope exclusions
Ind AS 8 does not address:
- Tax effects of corrections of prior period errors and retrospective adjustments (covered by Ind AS 12).
When the standard does not apply
Tax-related impacts arising from policy changes or error corrections are governed by deferred tax rules under Ind AS 12 Income Taxes instead of this standard.
Key Definitions under Ind AS 8
| Term | Definition |
|---|---|
| Accounting policies | Principles or practices applied when preparing financial statements. |
| Change in accounting estimate | Adjustment due to new information affecting asset/liability values or consumption rates. |
| Prior period errors | Omissions/misstatements caused by not using available reliable information at original statement date. |
| Retrospective application | Applying a new policy as if it had always been used. |
| Retrospective restatement | Correcting previous amounts as if no error had occurred originally. |
| Material | Omitting/misstating/obscuring info that could influence primary users’ decisions based on these statements. |
Recognition and Measurement under Ind AS 8
When to recognise
An entity selects accounting policies that apply an existing Indian Accounting Standard specifically to each transaction or event (Para 10). If no specific standard applies directly to a transaction type or event condition, management must use judgement to develop an appropriate policy that yields relevant and reliable results.
A change in accounting policy occurs only if required by another Indian Accounting Standard or if it results in more relevant/reliable information (Para 14). Material prior period errors are recognised through retrospective restatement unless impracticable.
Initial measurement
Entities must apply selected accounting policies consistently to similar transactions unless there is a justified change as per Para 13-14. When a new policy is adopted due to a new standard’s requirement:
Opening balances of each affected equity component are adjusted retrospectively at the start of the earliest comparative period presented.
If a voluntary change occurs (not mandated by another standard), retrospective application is also required unless impracticable. For example:
Adjustment Amount = Difference between carrying amounts using new vs old policy at start of earliest presented period
Errors discovered after authorisation require correction through restatement rather than current year profit/loss adjustment.
Subsequent measurement
Changes in estimates are accounted for prospectively from when new information becomes available (Para 36). This means only current/future periods reflect revised inputs; past periods remain unchanged.
Prior period errors require retrospective restatement, comparative figures are corrected as if no error had occurred originally (Para 42). If impracticable to determine effects on any specific prior period:
Restate opening balances for assets/liabilities/equity at start of earliest practicable period instead
Deferred tax effects arising from these adjustments must be recognised according to Ind AS 12 Income Taxes.
Distinguishing Policy Changes from Estimate Changes
The threshold question under Ind AS 8 is whether a change qualifies as an accounting policy change, which requires retrospective adjustment, or an estimate change, which applies prospectively (Para 35). If distinction proves difficult after careful analysis:
Treat it as an estimate change, apply prospectively only.
Policy changes alter measurement bases; estimate changes revise inputs within those bases. For example:
Switching inventory valuation from FIFO to weighted-average cost represents a policy change requiring full retrospective restatement. Revising useful life assumptions for plant equipment constitutes an estimate change, impacting only current/future depreciation charges.
Errors differ fundamentally, they involve incorrect application or omission despite having reliable facts available at original reporting date.
Worked Examples on Ind AS 8
Example 1: Voluntary policy change retrospectively applied
Sundaram Infotech Pvt Ltd shifts its inventory cost formula from weighted average to FIFO effective from FY 2025-26 because FIFO better reflects actual inventory flow patterns.
Computation Table
| Item | Weighted Average Method | FIFO Method |
|---|---|---|
| Inventory at start (1 Apr 2024) | Rs 800 lakhs | Rs 850 lakhs |
| Inventory at end (31 Mar 2025) | Rs 900 lakhs | Rs 965 lakhs |
Cumulative effect on opening retained earnings at start of comparative year = Rs 50 lakhs uplift.
FY 2024-25 cost of sales decreases by Rs 15 lakhs due to lower COGS under FIFO.
Restated profit increases by Rs 15 lakhs net-of-tax impact (assuming corporate tax rate at twenty-five percent).
Journal Entry
Opening adjustment as on April 1st:
Dr Inventory Rs 50 lakhs
Cr Retained Earnings Rs 37.5 lakhs
Cr Deferred Tax Liability Rs 12.5 lakhs
Comparative figures restated accordingly.
Example 2: Correction of a prior period error
During audit for FY 2025-26, Krishna Steel Industries discovers double-counted interest income totalling Rs 200 lakhs reported erroneously in FY 2024-25, a material error requiring correction.
Computation Table
| Item | As Previously Reported | After Correction |
|---|---|---|
| Interest income | Rs 200 lakhs extra | Removed |
| Profit impact | +Rs 150 lakhs net | Reduced |
| Opening retained earnings | Overstated by Rs 150 lakhs | Reduced |
Journal Entry
Adjustment as on April 1st:
Dr Retained Earnings Rs 150 lakhs
Dr Deferred Tax Asset Rs 50 lakhs
Cr Other Receivable Rs 200 lakhs
Comparative statements restated; nature/amount/disclosure per Para 49 requirements.
Disclosure Requirements under Ind AS 8
Disclosures under Ind AS 8 are essential for transparency and comparability as mandated by Schedule III to the Companies Act, 2013. Entities must provide detailed information when changing accounting policies, revising estimates, or correcting errors, enabling users and auditors to understand the financial statement impacts.
| Item | Requirement | Para Reference |
|---|---|---|
| Voluntary change in accounting policy | Nature of change, reasons why it provides reliable and more relevant information, amount of adjustment for current and each prior period presented | Para 29 |
| Change in policy required by Ind AS | Title of Ind AS, nature of change, transitional provisions applied, impact on current and prior periods | Para 28 |
| Change in accounting estimate | Nature and amount of change with effect on current period and future periods if practicable | Para 39 |
| Prior period error | Nature of error, amount of correction for each prior period and each line item affected, amount of correction at the beginning of the earliest prior period presented | Para 49 |
| Impracticability disclosures | Where retrospective application or restatement is impracticable, explain why and from when the new policy is applied | Para 50 |
| Future Ind AS standards issued but not yet effective | Disclose if the entity has not applied a new Ind AS that has been issued but is not yet effective, and known or reasonably estimable information relevant to its impact | Para 30 |
Auditors must evaluate these disclosures for completeness under SA 700 before concluding on true and fair presentation.
Common Mistakes & Industry-Specific Considerations
Common errors auditors flag
- Treating a change in estimate as a change in policy and applying it retrospectively (or vice versa)
- Failing to restate comparatives when correcting a material prior period error
- Inadequate disclosure of impact on each line item when applying a policy retrospectively
- Treating the initial application of a new Ind AS as a voluntary policy change (transitional provisions of the new standard apply)
- Failing to disclose impact of standards issued but not yet effective (Para 30)
- Misclassifying a routine revision of useful life of equipment as an error rather than an estimate change
Industry application notes
Listed companies must comply with SEBI requirements for restated financial information in offer documents and annual reports. Material errors or policy changes require robust disclosure to avoid SEBI investigations or adverse credit rating actions.
Audit firms face heightened scrutiny: discovery of material prior period errors during audit may trigger consideration under SA 705 (Modified Opinion) if management does not correct them. NFRA inspection reports have highlighted recurring lapses in Ind AS 8 disclosures.
In consolidation groups, aligning subsidiary policies to the parent’s does not require full retrospective restatement. Such alignment is treated as a measurement adjustment under Ind AS 110 Consolidated Financial Statements.
Ind AS 8 vs AS 5 vs IFRS: Key Differences
The following table compares key aspects across Indian GAAP (AS 5), Ind AS 8, and IFRS (IAS 8):
| Aspect | AS 5 | Ind AS 8 | IFRS |
|---|---|---|---|
| Scope | Net profit, prior period items, changes in policies | Same plus changes in estimates and errors comprehensively | Same as Ind AS |
| Voluntary policy change | Limited guidance; current period charge typically | Retrospective application required | Same as Ind AS |
| Prior period errors | Adjusted in current period P&L (extraordinary item earlier) | Retrospective restatement required | Same as Ind AS |
| Change in estimate | Prospective | Prospective | Prospective |
| Disclosure of new standards not yet effective | Not required | Required (Para 30) | Required |
India’s adoption of Ind AS 8 closely tracks IAS 8 issued by the International Accounting Standards Board. However, Indian regulators have added specific disclosure requirements for standards issued but not yet effective. The treatment of extraordinary items under old Indian GAAP (AS 5) no longer exists under Ind AS 8.
Latest Amendments to Ind AS 8 (FY 2026-27)
No amendments have been notified to Ind AS 8 for FY 2026-27 as of 2026-05-02. The standard continues to apply in its existing form.
Related Standards You Should Know
- [Ind AS 1](/ind-as-1-presentation-of-financial-statements/), Comparative information principles align with Ind AS 1 presentation requirements.
- [Ind AS 12](/ind-as-12-income-taxes/), Tax effect of policy changes and error corrections requires deferred tax adjustments.
- [Ind AS 34](/ind-as-34-interim-financial-reporting/), Changes in policies and estimates affect interim reporting comparability.
- [AS 5](/as-5-net-profit-prior-period-changes/), Equivalent standard for non-Ind AS companies; less stringent on retrospective application.
Need Help with Ind AS 8 Compliance?
Patron Accounting LLP supports companies across India with end-to-end compliance for Ind AS 8 Accounting Policies, Changes in Estimates and Errors. Our team combines technical expertise with practical experience gained from statutory audits and advisory engagements.
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Frequently Asked Questions (FAQs)
All companies required to prepare financial statements under Indian Accounting Standards must comply with Ind AS 8. This includes listed companies, large unlisted companies above specified net worth thresholds, group reporting entities consolidating subsidiaries or associates, and voluntarily adopting entities.
An accounting policy change alters the measurement basis itself, such as switching inventory valuation methods, requiring retrospective application. An estimate change revises inputs within an existing basis, such as useful life or residual value, requiring prospective recognition only. If unclear after analysis, treat it as an estimate change per Para 35.
Retrospective application means applying a new accounting policy or correcting an error as if that policy had always been used. This involves restating comparative figures for all affected prior periods unless impracticable. Opening balances are adjusted at the start of the earliest comparative period presented.
Material prior period errors are corrected by restating comparative amounts for previous periods presented in financial statements. If it is impracticable to determine effects for specific periods, opening balances are adjusted at the beginning of the earliest practicable period instead.
Under old Indian GAAP (AS 5), prior period items were often adjusted through current year profit or loss; voluntary policy changes lacked detailed guidance. Under Ind AS 8, retrospective restatement is mandatory for both material errors and voluntary policy changes unless impracticable.
If determining effects on specific prior periods is impracticable after exhaustive effort, entities must disclose why full restatement was not possible. They then adjust opening balances at the start of the earliest practicable period per Paras 43-45.
Yes. Voluntary changes require retrospective application unless impracticable; mandatory changes mandated by another standard follow that standard’s transitional provisions even if those differ from general rules under Paras 19-27.
Entities must disclose nature/reasons for any voluntary policy change; quantitative impacts on each affected line item; details about errors corrected; explanation if full retrospective application was impracticable; plus effects from future standards issued but not yet effective per Paras 28-30/49-50.
No. When aligning newly acquired subsidiary accounting policies to those of the parent during consolidation under Ind AS 110, this alignment is treated as a measurement adjustment rather than a full retrospective restatement under Ind AS 8.
Entities must disclose any new Indian Accounting Standard issued but not yet effective at balance sheet date along with known or reasonably estimable information about potential financial impacts per Para 30. This enhances transparency for users about upcoming changes.
About This Article
Reviewed by CA & CS Team · Patron Accounting LLP
Technical reviewer: CA Sundram Gupta, FCA
Last reviewed: 2026-05-02
Sources: ICAI Compendium of Accounting Standards · MCA Notification (Companies (Indian Accounting Standards) Rules, 2015, dated 16 February 2015) · IFRS Foundation