Appendix A Accounting Changes & Errors

Question 1

A threshold determined by management and auditors in which omission of an item would have an impact on the financial statements.

Answer 1

Material

Question 2

_____ treatment reflects financial statement changes in the current period of change and future periods.

Answer 2

Prospective

Question 3

_____ _____ adjustment is an addition to or reduction in beginning retained earnings due to correction of errors.

Answer 3

Prior Period

Question 4

_____ treatment revises prior period financial statements when presented for comparative purposes.

Answer 4

Retrospective

Question 5

Another word for accounting mistakes.

Answer 5

Errors

Question 6

A Change in Accounting _____ occurs when you switch from one GAAP accounting method to another.

Answer 6

Principle

Question 7

_____ _____ treatment applies accounting change only to the adoption period with cumulative effect adjustment to beginning retained earnings.

Answer 7

Modified Retrospective

Question 8

A Change in Reporting _____ occurs as a result of presenting consolidated financial statements in place of statements of individual companies.

Answer 8

Entity

Question 9

A Change in Accounting _____ involves a revision when new information comes to light (e.g., Depreciation, Bad Debts, etc.).

Answer 9

Estimate

Question 10

Process of revising previously issued financial statements to reflect error correction.

Answer 10

Restatement