Accounting Errors Flashcards
How do you calculate the remaining useful life when an asset’s life is revised?
When is a change in accounting principle recorded prospectively vs. retrospectively
Impact of inventory errors on COGS and Net income blueprint
How is the correction of a mathematical error in prior years’ depreciation recorded?
What are the types of accounting changes and their treatments
What is a change in accounting principle, and how is it treated
How are prior-period accounting errors corrected when comparative financial statements are issued or not issued?
Prior-Period Accounting Errors: Correction Methods
If Comparative Financial Statements Are Issued:
- Errors are corrected directly in prior-period financials as if the error never occurred.
- No impact on the current period’s retained earnings.
If No Comparative Financial Statements Are Issued:
- Errors are corrected via a cumulative adjustment to retained earnings (or AOCI) in the current period.
- Prior-period financials are not restated.
Key Point:
- Errors must be corrected properly; disclosure alone is insufficient.
What is a change in reporting entity, and how is it accounted for
How is a change in revenue recognition for long-term construction contracts from a point in time to over time accounted for?
What are the steps to adjust beginning retained earnings for a prior-period error involving over-expensed amounts? Say 60k was recognized lump sum when it should have been over a 3y period
How are changes in depreciation method and depreciation errors treated differently under U.S. GAAP?
How is the cumulative effect of a change from LIFO to FIFO reported in the financial statements under ASC 250?
How is the cumulative effect of changing inventory methods calculated and reported
How is a change in depreciation method reported in financial statements?
How are changes in warranty cost estimates treated in financial statements?