FAR 1

Question 1

When are gains/losses on discontinued operations recognized?

Answer 1

In the year that they occur

Question 2

How are changes in estimate accounted for?

Answer 2

Prospectively. This affects current and future income. Should NOT restate prior periods.

Question 3

Changes in accounting principle inseparable from change in estimate should be treated as ____________.

Answer 3

A Change in Estimate

Question 4

How are changes in accounting principle accounted for?

Answer 4

Retrospectively. Should be recognized by adjusting beginning retained earnings in the earliest period presented. Prior period financial statements should be restated.

Question 5

Define change in accounting principle.

Answer 5

A change in accounting principle to another acceptable accounting principle. GAAP to GAAP or IFRS to IFRS.

Question 6

How is a change in depreciation method accounted for?

Answer 6

As a Change in estimate, prospectively.

Question 7

How is error correction accounted for? (ex. From cash basis to accrual basis)

Answer 7

As a prior period adjustment.

**Changing from non-GAAP to GAAP is an error.