F1 M6 - Accounting Changes and Errors

Question 1

How is a change in estimate reported and what are some examples?

Answer 1

Prospective > Forward
changes will be made in the current and future years only.
Examples
Change in estimated useful life for fixed assert
deprecation
allowance, uncollectable estimates
pending litigation that hasnt been settled

Question 2

How is a change in accounting principle reported and what are some examples?

Answer 2

Retrospective < Back (CHANGES ARE NET OF TAX)
Examples
Changes from gaap methods to other gaap methods
change from lifo to fifo

Question 3

How is a change in reporting entity reported and what are some examples?

Answer 3

Retrospective < Back

Business combination

Question 4

How is an error correction reported and what are some examples?

Answer 4

Restatement of prior periods

errors made to prior period F/S like error to RE