No, You Can’t Just ‘Change the Policy’ Because It Looks Better

11 Jun

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Your clients probably don’t ask you about accounting policies. They just expect the financials to “make sense.” But when SARS knocks, a lender questions the numbers, or you uncover a prior year mistake, it’s Section 10 of IFRS for SMEs that makes or breaks the conversation.

This section isn’t just compliance. It’s a roadmap for applying professional judgement, fixing past errors, and keeping your practice out of hot water. It also creates clear opportunities to offer billable services your clients actually need.

Accounting Policies: Consistency Matters

Section 10 requires you to apply the Standard when it addresses a transaction. If the Standard does not deal with it directly, you must apply your judgement to choose a policy that gives relevant and reliable information. This means the financials must reflect economic reality, be neutral, and be complete in all material respects.

Once a policy is chosen, it must be applied consistently across similar transactions. No switching approaches to suit the result you or the client prefer.

You can offer an annual accounting policy review as a paid service. Clients may not ask for it, but they benefit from it, especially when they need to apply for funding or prepare for due diligence.

Changing a Policy: It’s Not Just a Journal Entry

You may only change a policy if the Standard requires it or if the new policy results in more relevant and reliable information. Most of the time, the change must be applied retrospectively. That means restating prior period figures and adjusting opening balances.

There is an exception. If your client switches from the cost model to the revaluation model for property, plant and equipment, the change is treated as a revaluation under Section 17 and applied prospectively.

Disclose the nature of the change, its impact on each line item (if practicable), and explain if a full restatement isn’t possible. This is not just paperwork. It’s your professional signature on the integrity of the financials.

Accounting Estimates: Keep Them Current

Estimates change. That’s normal. Bad debt assumptions, depreciation periods, and inventory write-downs must all reflect current information.

These changes are applied prospectively. You do not restate prior years. If you’re not sure whether something is a policy change or an estimate change, Section 10 says to treat it as an estimate. This avoids unnecessary complexity.

You can use estimate reviews to show your clients that you’re actively managing their financial risk and not just crunching numbers. That’s value worth charging for.

Errors: Don’t Wait Until Audit Time

Errors happen. They could be due to misapplied policies, missed invoices, or even fraud. If the mistake is material and based on information that was available at the time, it must be corrected retrospectively. That means fixing prior years or, if that’s not practical, adjusting the earliest balances you can.

You must disclose the nature of the error, the impact on each affected line item, and whether the error affects earlier periods. If exact figures can’t be determined, explain why.

Don’t hide errors. Fix them properly. Your credibility depends on it and your clients will thank you for taking the lead.

Disclosures: Clear, Honest, and Necessary

Every change in policy, estimate, or prior period error must be disclosed in plain terms. Explain what changed, why it changed, and how it affects the numbers. If something can’t be quantified, say so and explain why.

These disclosures not only satisfy the Standard, they also protect your firm and help your clients understand the impact of financial decisions.

How to Turn Section 10 into a Billable Service

You are already applying Section 10. The question is: are you charging for it?

Here’s how to make it a revenue generator:

Offer a fixed-fee “Policy and Estimate Health Check” for clients each year.
Build disclosures and corrections into your year-end process and engagement letters.
Use errors and policy changes as teaching moments to reinforce your value.

Speak in your client’s language. Tell them, “This helps you stay out of trouble with SARS and ensures your numbers will stand up when it matters most.” That’s how you move from bookkeeper to trusted business partner.

Final Word

Section 10 is not theory. It is daily practice. It is about making smart judgement calls, fixing what went wrong, and showing clients that their numbers are in expert hands. Get comfortable with this section. Use it confidently. And make sure you get paid for the work you’re already doing.

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