Flashcards in Acctg Changes and Error Corrections Deck (8)
Retrospective changes are...
Changes made to prior statements that effect beg retain earnings of the current statement. Made for changes in acc principles and changes in reporting entities.
The correction of the statement presented along with correcting the opening retained earnings balance. Made for accounting errors.
Prospective changes are...
Applied to the current and future periods only, prior year statements are unaffected. Made for changes in accounting estimates and for accounting principles whose prior year effects impracticable.
Some examples of accounting principle changes are...
Change in inventory valuation methods, accounting for LT construction contracts, change in method of application of LCM to inventory
A change from cash basis accounting to accrual basis accounting would be classified as a change in accounting principle. TF
False, it would be considered correction of an error, as cash basis accounting is not allowed by GAAP.
Details of retrospective changes need to be reported in the footnotes. TF
Changes in depreciation methods would be considered a change in accounting estimate. TF