F2 - M2 - Accounting Changes and Error Corrections

Question 1

How to Treat change in Accounting Estimate

Answer 1

1)Change in Accounting Estimates only affect current and subsequent periods.

2) When effect of change in Accounting principle is inseperable from change in Accounting Estimate it should be treated as change in accounting estimates affecting current and subsequent events

Question 2

How to treat Accounting changes when there is”change in entity”

Answer 2

When there is change in entity Finanacial statement of all prior periods presented should be restated

Question 3

when question says sales were don throughout year how you will calculate

Answer 3

It should be calculated by calculating simple average. which is divide by 2

Question 4

For SEC filer which is consider as date of issuance of Financial statement for subsequent event consideration

Answer 4

The date that financial statements are widely distributed to financial statement users and statements are in format and all approvals are sought.

Question 5

which entities require to disclose subsequent event period end date

Answer 5

Entities which are not SEC FILERS are required to disclose subsequent event period end date, all SEC filers need not disclose it.

Question 6

Which Fair Market value needs to be considered for stocks

Answer 6

First you need to see which market offers best rate after deducting transaction cost.

Second you have to select stock price available in that market not the net price after stock.

Question 7

Is fair value exit price or entry price

Answer 7

Fair value is exit price, The price that would be received when selling an asset or paid when transferring a liability in an orderly transaction between market participants.

Question 8

How to value certain financial instruments

Answer 8

Fair value is measured for specific asset/liability or group of asset liability.

company may apply fair value on instrument basis but once fair value is elected, it is to be consider till the disposal of the asset or liability.

Question 9

What are different approaches for Fair value

Answer 9

1) Market approach- Market approach uses prices from Market for similar or identical asset/liability.
2) Cost approach- coast approach take into consideration current replacement cost

3) Income approach- Income approach converts future amounts including cash flow or earning to a single discounted amount to measure fair value.