Question

What is the indirect effect of a change in accounting policy? Briefly describe the approach to reporting the indirect effects of a change in accounting policy under IFRS.

Short answer

Indirect effects show a change in cash flow of current or future periods, and it should be reported in the current period of the change under IFRS.

Step-by-step solution

Indirect effect of change in accounting policy

The indirect effect of the change in accounting principle shows the change in the current or future cash flows when the change is applied retrospectively.

Approach to report indirect effects

The indirect effects should not be reported in the retrospective application. Instead, they should be reported in the period when the change occurs.