Ch. 30 - Changes in Accounting

Question 1

Three types of changes in accounting

Answer 1

1. change in estimate
2. change in policy
3. correction of PY error

Question 2

Two approaches for accounting for changes

Answer 2

1. Prospective - change in current and future years

2. Retrospective - change past years

Question 3

Change in Estimate - how to account

Answer 3

1. account for prospectively

Question 4

Change in Estimate - Disclosure

Answer 4

1. nature and amount of change in estimate and impact on current/future years
2. if estimate of impact on future years is not possible, disclose this

Question 5

Change in Accounting Policy - when is a change allowed

Answer 5

1. the voluntary change provides more relevant and reliable information to users
2. the standards require the change

Question 6

Change to Accounting Policy - how to account

Answer 6

1. A voluntary change to provide more relevant and reliable info is applied retrospectively
2. A change in standard will say whether to apply retrospectively or prospectively

Question 7

Errors - how to account

Answer 7

Errors are accounted for retrospectively

Question 8

Errors - Disclosures

Answer 8

1. description of the nature of the error
2. amount of the error
3. if retrospective restatements are not practical, a description of how it was corrected