Accounting changes and error corrections

Question 1

Change in Accounting principle

Answer 1

Retrospective
Ex: FIFO to LIFO
Extraction industries: Full cost method change
Construction industries: Completed contracts to percentage of completion

Question 2

Change in Accounting estimate

Answer 2

Prospective - Don’t go and change prior periods

Question 3

Inventory errors

Answer 3

correct themselves after two years

Question 4

IFRS

Answer 4

Change in reporting entity don’t exist

Question 5

IFRS

Answer 5

Because under IFRS reporting, changes in accounting policies are not considered prior period errors. Prior period errors include arithmetic mistakes; accounting policy application mistakes; and recognition, measurement, presentation, and disclosure mistakes.

Question 6

DTD and DTL

Answer 6

If it is taxable later ex: bad debts it is deductible temporary difference which will result in dta. . If it is already included in the financial statements and going to be taxed in future periods like gain on trading securities it will result in it is a TTD which will result in DTL.