How are changes in accounting policies treated according to IAS 8?

Under IAS 8, changes in accounting policies are indeed applied retrospectively. This means that when a company changes its accounting policy, it must adjust the financial statements for all prior periods presented in order to reflect the new policy. This includes adjusting the opening balances of assets, liabilities, and equity at the date of the change, as well as restating comparatives for prior periods to enhance the comparability of financial information.

By applying the change retrospectively, stakeholders can better understand the impact of the new policy as it provides a clear picture of how financial results would have appeared under the new accounting policy for previous reporting periods. This method supports transparency and allows users of financial statements to make more informed assessments regarding an entity's financial position and performance over time.

The rationale for the correct answer centers around IAS 8's goal of ensuring consistency in financial reporting, enhancing comparability between periods, and providing more reliable financial information to users.