Another examples where judgement is required in financial reporting are –
Deciding the method of depreciation and asset value as per the code of asset class. The asset’s useful life differs from the one set by the Fiscal code of class of assets and that is used to calculate the profit after tax. Hence, the fiscal depreciation and accounting deprecation needs to be reported separately.
Lease accounting (under IAS 17) is another area where professional judgement is required. The lease should be properly classified as a financial lease or operating lease. Any wrong classification may lead to affect the assets and liabilities of both lessor and lessee. The professional judgement helps to analyze the risk and benefit of lease for both lessor and lessee.