FAR 1.6 - Accounting Changes & Error Corrections

Question 1

Changes in accounting estimates require what application?

Answer 1

Prospective - implement in current period and continue in future periods

Question 2

Changes in accounting principle require what application?

Answer 2

Retrospective - adjust beginning Retained Earnings net of tax AND if prior period financials are presented, restate

Question 3

What are two exceptions to a change in accounting principle that are treated as changes in accounting estimates (prospective)

Answer 3

Changing TO LIFO
And
Change in depreciation method

Question 4

For error correction, if comparative financial statements are presented and financial statements for the year with the error are present,

Answer 4

Correct the error in those prior financial statements

Question 5

For error correction, if comparative financial statements are presented and financial statements for the year with the error are not present,

Answer 5

Adjust (net of tax) the opening retained earnings of the earliest year presented