M1-F6 - Accounting Changes and Error Corrections Flashcards
How are changes in Account estimates treated
Prospectively ( Only adjustments to current and future years)
How are changes in lives of fixed assets treated
Prospectively as change in estimate
How are adjust of year end accruals of salaries/bonuses treated
Prospectively as change in estimate
How are write-downs in inventory treated
Prospectively as change in estimate
How are material, nonrecurring IRS adjustments treated
Prospectively as change in estimate
How are changes to LIFO or Changes to Depr method treated?
Changes in Acct Principals but as a Prospectively as change in estimate
How are changes in Accounting Principals Treated
Retrospective Application (adjustments net of taxes (X (1-T))
In non comparative FS, the cumulative effect is equal to
the difference between he amount of Beg RE in the period of change and what RE would have been if the change had been retroactively applied
In comparative FS
Restate as far back as you can
How are changes in Account Entity treated
Retrospective Applications
Changes in Accounting Entity should be presented as
All previous FS presented should be restated
How are error corrections treated
Prior period Adjustment net of tax
For error corrections, if error is material how should it be adjusted
No adjustment to RE
For Error corrections, how should present information if year is presented
Correct the information, adjust beg Re of the earliest year presented (if error year is not presented)
What are the two exceptions for changes in Accounting Principle
Change in LIFO, and Change in Deprecation Method
For change in principal, entity must disclose for GAAP (4)
1) Nature and reason for change, 2) an explanation of why the new principal is preferable, 3) impact to income from continuing Ops 4) cumulative effect on beginning RE of the earliest period presented.
IFRS does not include the concept of change in _________
Change in accounting entity
Under IFRS, when a change in accounting principle is made in the Current period the cumulative effect for the change is shown __________-
At the beginning of the prior period
When a change in accounting principle for IFRS, the entity must show at minimum
3 Balance sheets, 2 other financial statements
For IFRS, the cumulative effect adjustment is shown as the adjustment to _____________ on the balance sheet for the __________
beginning retained earnings, beginning of the prior period
What are the 3 disclosures required with a correction of a serial period period error for IFRS
1) Impact of correction on basis and diluted EPS for each period presented 2) The nature of the error, 3) the amount of the correction at the beginning of the earliest period presented.
