Part 10- Key Judgements & Estimates

Preparation of financial statements requires management to make certain estimations, assumptions and judgements that affect the reported profits, assets and liabilities. To recognise this, FRS 102 will introduce a disclosure that most SME’s will not be familiar with- Key Judgements & Key Estimates. These will appear in the financial statements by way of a note and will help the reader to have a greater understanding of the accounts by giving additional information on the more significant items recognised in the Financial Statements. Examples of Key Judgements and Key Estimates to be disclosed are as follows;

Key Judgements

• Accounting policy choices (ie. write off development expenditure Vs. capitalise).
• Decision to classify investment property as fixed assets in certain circumstances.
• Use of the going concern basis where there are uncertainties.

Key estimates

• Bad debt provisions.
• Asset valuation estimates.
• Deferred tax rates estimated on sale of assets.

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