Difference Between AS 5 and Ind AS 8

Accounting Standard 5: The objective of AS 5 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, AS 5 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.

This Statement 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.

Ind AS 8: Accounting Policies, Changes in Accounting Estimates and Errors

The objective of Ind AS 8 is to prescribe the 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. The Standard is intended to enhance the relevance and reliability of an entity’s financial statements, and the comparability of those financial statements over time and with the financial statements of other entities.

It is clarified that disclosure requirements for accounting policies are laid down in Ind AS 1, Presentation of Financial Statements. However, the disclosures required for changes in accounting policies are as set out in this Accounting Standard.

Difference Between AS 5 and IndAS 8

AS 5 IND AS 8
Less disclosures required as compared to IND AS 8 Disclosure requirements given in IND AS 8 are more detailed as compared to AS 5.

Change in Accounting policy is allowed:

  • to comply with AS
  • to give better information
  • to comply with statute.

Change in accounting policy is allowed:

  • to comply with AS
  • to give better information
It requires each extraordinary item to be disclosed separately on the Face of P&L Statement. IND AS 1 prohibits presentation of any item of  income or expense as extraordinary item and hence this AS does not deal with the same.
It restricts the definition of accounting policies to mean specific accounting principles + method of applying those principles. It broadens the definition of accounting policies by stating that accounting policies, in addition to accounting principles and method of applying those principles, also includes rules and practices, bases, conventions, etc. applied by an entity in preparation and presentation of financial statements.
Existing AS 5 does not specify how change in accounting policy should be accounted for except when the change in accounting policy is due to adoption of new AS. IND AS 8 requires that any change in the accounting policy should be accounted for, with retrospective effect. i.e. all comparative information, opening balances and curreny year figures have to be restated to bring them in line with new policy. There are however, some exceptions to the above.
AS 5 requires the rectification of prior period items with prospective effect. IND AS 8 requires the rectification of material prior period errors with retrospective effect i.e. restating the erroneous comparative amounts and opening balances. The above will however not be required if it is impracticable to determine the period specific effects.
AS 5 defines “Prior Period Items” as incomes or expenses  which arises in current period as a result of errors or ommissions in preparation of financial statements of one or more prior periods.

IND AS 8 uses the word “Prior period errors” and defines it as errors and ommissions arising due to:

  • failure to use reliable information or
  • misuse of information

which was available when the financial statements of the prior periods were approved and could reasonably be expected to have been obtained and taken into account in the preparation and presentation of those financial statements.

Does not contain such requirements Specifically states that errors include frauds.
Objective is to prescribe the classification and disclosure of certain items in the statement of profit and loss for uniform preparation and presentation of financial statements. Objective of Ind AS 8 is to prescribe the 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.