21.6 Examples
Review the December 31, 2013 financial statements of Nestlé Group [new tab] (taken from the company’s annual report).
These financial statements provide a number of examples of how accounting changes are handled. First, in Note 1 on page 80, there is a general discussion of the use of estimates. The discussion identifies several areas where estimates are required—provisions, goodwill impairment, employee benefits, allowance for doubtful receivables, and taxes. The note also states that estimate changes are accounted for in the current and future periods to which the change affects, which is consistent with the prospective approach discussed previously in Section 21.3.
On page 117, Note 13.1 on provisions describes the revision of previous estimates by using the phrase “unused amounts reversed.”
In addition to the estimate changes, the prior year comparatives were both “restated” and “adjusted.” The restatement related to the application of two new IFRSes: IAS 19 and IFRS 11. The application of these new standards resulted in changes to both the income statement and the balance sheet of the previous year. A restated balance sheet on January 1, 2012 was also provided. As well, asset and liability accounts on the restated balance sheet were further adjusted due to a change in the provisional amounts of net assets obtained on the acquisition of a subsidiary company, as complete information was not available at the time of acquisition. This change is treated similarly to an error correction, and the comparative figures have been retrospectively restated. The disclosure of these restatements and adjustments can be found in Note 22 on pages 140 through 146 of the financial statements. As well, Note 2.2 on page 92 provides further details about the adjustments resulting from the acquisition of the subsidiary company.
These examples provide a good illustration of the detail required in the disclosure of accounting changes. This detail can help the readers make better comparisons with previous years’ results as well as with other entities, both of which could have an impact on readers’ decision-making processes.
