Accounting Changes and Error Corrections Flashcards
Inventory Change from FIFO to LIFO
Change in Accounting Principle. Do Nothing.
When you go to LIFO OR LAHORE you DO NOTHING. You CAN’T build LAYERS!
EXCEPTION TO THE GENERAL RULE
Inventory Change from LIFO to FIFO
Change in Accounting Principle.
Retrospective
New Update on Accounting Standard
Change in Accounting Principle.
Retrospective
Change from in method of Depreciation, Amortization and Depletion
Change in Accounting Principle.
NOT Retrospective. Treat it like Estimate!!!
EXCEPTION TO THE GENERAL RULE
Inventory Change from LIFO to to FIFO
Change in Accounting Principle.
Retrospective
Adjust the Beginning Retained Earning of Earliest Year Presented IF the year is NOT PRESENTED
Is Change from Non-GAAP to GAAP a Change in Accounting Principle?
No. It is an ERROR
How do you implement the Retrospective change?
Cumulative effect of a change in accounting principle is equal to the difference between the amount of beginning Retained Earnings in the period of change and what the Retained Earnings would have been if the accounting change had been retroactively applied to ALL PRIOR AFFECTED PERIODS. Cumulative EFFECT is equal to the difference between beginning Retained Earnings in the first period presented and what Retained Earnings would have been if the new principle had been applied to ALL PRIOR PERIOD. (NET OF TAX)
Change in Lives of Fixed Assets
Change in Accounting Estimate
Prospectively
Adjustment of year-end accrual of officers’ salaries and/or bonuses
Change in Accounting Estimate
Prospectively
Write-down of Obsolete Inventory
Change in Accounting Estimate
Prospectively
Material, nonrecurring IRS Adjustment
Change in Accounting Estimate
Prospectively
Settlement of Litigation
Change in Accounting Estimate
Prospectively
Changes in Accounting Principle that are inseparable from a change in estimate
Change in Accounting Estimate
- Going to LIFO
- Change in Depreciation Method
(e. g., A change from the installment method to immediate recognition method because uncollectible accounts can now be estimated).
Revisions of estimates regarding discontinued operation.
Change in Accounting Estimate
Prospectively