A change of accounting policy may be
mandatory as a result of a change in UK GAAP.
A new policy may be mandatory on the implementation of a new
accounting standard. Examples of new accounting standards that have
led to changes of accounting policy include:
A change can be made
voluntarily.
FRS18 contains a requirement to regularly review policies to
ensure that they remain appropriate. However it also states that in
judging whether a new policy is more appropriate weight should be
given to the impact on comparability. Consistency of accounting
treatment within each accounting period and from one period to the
next is recognised as a desirable quality. This concept of
consistency has also been recognised in the courts. For example its
importance in relation to the valuation of stocks was stressed by
the House of Lords in Ostime v Duple Motor Bodies Ltd [1961]
39TC537. For a new policy to be appropriate the need for change
must outweigh the need for consistency. That will depend on the
facts, including the comparative degrees of validity of the old and
new policy.
Because of the principle of consistency, there would need to
be a good reason for a change from one existing valid policy to
another. What constitutes a good reason for a change is a question
to be answered by reference to the facts of each case. Examples of
such justified changes are where:
