Chapter 22

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Chapter 22
2011-05-04 14:41:53
Accounting changes

Accounting changes
Show Answers:

  1. What are the 3 types of accounting changes?
    • Change in acct'g principle
    • Change in Acct'g estimate
    • change in reporting entity
  2. Are errors considered an accounting change?
  3. Give an example of a change in accounting principle
    • Average cost to LIFO
    • completed-contract to % of completion
  4. What approach is taken for a change in accounting principle?
    A retrospective approach. Prior financial statements must be adjusted so that they can be compared better
  5. Give an example of a change in estimate
    • uncollectible revenues
    • inventory
    • useful lives of assets
    • salvage value of assets
    • change in depreciation methods
  6. How are changes in estimate approached?
    On a prospective basis. Changes in estimates are accounted for in the current period and any future periods
  7. What is an example of a change in reporting entity?
    • consolidated statements instead of individual company statements
    • changing companies included in financial statements
    • changing subsidiary companies in a consolidation
  8. How are changes in reporting entity approached?
    Changes in reporting entity are accounted for retrospectively. The financial statements of all prior periods presented must reflect the change.