M1-F6 - Accounting Changes and Error Corrections

Question 1

How are changes in Account estimates treated

Answer 1

Prospectively ( Only adjustments to current and future years)

Question 2

How are changes in lives of fixed assets treated

Answer 2

Prospectively as change in estimate

Question 3

How are adjust of year end accruals of salaries/bonuses treated

Answer 3

Prospectively as change in estimate

Question 4

How are write-downs in inventory treated

Answer 4

Prospectively as change in estimate

Question 5

How are material, nonrecurring IRS adjustments treated

Answer 5

Prospectively as change in estimate

Question 6

How are changes to LIFO or Changes to Depr method treated?

Answer 6

Changes in Acct Principals but as a Prospectively as change in estimate

Question 7

How are changes in Accounting Principals Treated

Answer 7

Retrospective Application (adjustments net of taxes (X (1-T))

Question 8

In non comparative FS, the cumulative effect is equal to

Answer 8

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

Question 9

In comparative FS

Answer 9

Restate as far back as you can

Question 10

How are changes in Account Entity treated

Answer 10

Retrospective Applications

Question 11

Changes in Accounting Entity should be presented as

Answer 11

All previous FS presented should be restated

Question 12

How are error corrections treated

Answer 12

Prior period Adjustment net of tax

Question 13

For error corrections, if error is material how should it be adjusted

Answer 13

No adjustment to RE

Question 14

For Error corrections, how should present information if year is presented

Answer 14

Correct the information, adjust beg Re of the earliest year presented (if error year is not presented)

Question 15

What are the two exceptions for changes in Accounting Principle

Answer 15

Change in LIFO, and Change in Deprecation Method

Question 16

For change in principal, entity must disclose for GAAP (4)

Answer 16

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.

Question 17

IFRS does not include the concept of change in _________

Answer 17

Change in accounting entity

Question 18

Under IFRS, when a change in accounting principle is made in the Current period the cumulative effect for the change is shown __________-

Answer 18

At the beginning of the prior period

Question 19

When a change in accounting principle for IFRS, the entity must show at minimum

Answer 19

3 Balance sheets, 2 other financial statements

Question 20

For IFRS, the cumulative effect adjustment is shown as the adjustment to _____________ on the balance sheet for the __________

Answer 20

beginning retained earnings, beginning of the prior period

Question 21

What are the 3 disclosures required with a correction of a serial period period error for IFRS

Answer 21

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.