M6 - Accounting Changes and Error Calculations

Question 1

When the effect of a change in accounting principle is inseparable from the effect of a change in accounting estimate the reporting treatment for the overall effect is as a change in estimate. Thus, the effect is reported prospectively as a component of income from continuing operations. True or False?

Answer 1

True

Question 2

Restatement of all prior periods is the retro active accounting treatment that is applied to the correction of an error in the retrospective accounting treatment given to changes in accounting principle. However, a change in accounting principle that is inseparable from the effect of a change in accounting estimate is now treat it as a change in accounting estimate. True or false?

Answer 2

True

Question 3

The cumulative effect of a change in the county principal such as switching from the FIFO method of inventory to the weighted average method is A change in accounting principle which is shown as an adjustment to the beginning retained earnings. True or false?

Answer 3

True

Question 4

A change in accounting estimate affects only the current and subsequent future. If the change affects both. It does not affect prior. Nor retained earnings. True or false?

Answer 4

True

Question 5

Restating prior years financial statements is required when comparative financial statements are shown for prior period adjustments of “Corrections of errors”, “changes in entities”, and “changes in accounting principle”. True or false?

Answer 5

True

Question 6

The correction of an error in the financial statements of a prior period should be reported, net of tax, in-the current statement of retained earnings as an adjustment of the opening balance. True or false?

Answer 6

True

Question 7

Under IFRS, When an entity records a change in accounting principle, the entity must at a minimum present three balance sheets (End of current period, End of prior period, And end of the beginning of prior period) And two of each other financial statement (current and prior period). The cumulative affect adjustment is shown as an adjustment to beginning retained earnings on the balance sheet for the beginning of the prior period. True or false?

Answer 7

True

Question 8

IFRS Does not require a description of the internal controls put in place to prevent the occurrence of the error in future periods. True or False?

Answer 8

True

However it does require that you report the nature of the error, The amount of the correction at the beginning of the earliest period presented, And the impact of the correction on basic and diluted earnings per share for each period presented.

Question 9

When is it generally considered impracticable to calculate the cumulative effect of change in inventory pricing? LIFO to weighted average? Or weighted average to LIFO?

Answer 9

Weighted average to LIFO because In most cases, data on the historical LIFO layers is not available. The change is accounted for prospectively. In a change from LIFO to Weighted average, there is no such impracticability.