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Flashcards in Accounting Changes Deck (10):
1

Retrospective Application:
Prior Periods adjusted
Retained Earnings adjusted
Completed Contract to % Completion
Ex: LIFO to FIFO

Accounting Changes

2

A change of principle.

Applied retrospectively.

Accounting Changes

3

A change in accounting principle.

Applied retrospectively.

Accounting Changes

4

A change in accounting estimate is applied prospectively (going forward).

No backwards adjustment is made.

Accounting Changes

5

Change in depreciation method would be a change in accounting estimate.

It is applied prospectively.

Accounting Changes

6

Cumulative effect of error gets adjusted to the beginning balances of assets and liabilities in the earliest period presented in the comparative statements.

The correction of the error must be included in the footnotes.

Accounting Changes

7

Effect is Material

Is identifiable in Prior Period

Couldn't be estimated in Prior Periods

Accounting Changes

8

It is treated as a correction of an accounting error.

Cumulative effect of error gets adjusted to the beginning balances of assets and liabilities in the earliest period presented in the comparative statements

Correction of the error must be included in the footnotes

Accounting Changes

9

Effect on Ending Inventory : Effect on Net Income

If one is overstated- both overstated. If one is understated- both understated.

Misstating inventory corrects itself after TWO periods.

Accounting Changes

10

Applied retrospectively.

All prior periods presented for comparative purposes must reflect the change

Footnote disclosures must be made

Changing to Consolidated Statements

Accounting Changes