Module 9c

Question 1

What are the 3 kinds of Accounting Changes?

Answer 1

Changes in Accounting Principle. Changes in accounting Estimate. Or Changes in reporting entity.

Question 2

In what kind of accounting changes do previously issued financial statements need to be restated?

Answer 2

None, Financials are only restated for the correction of an error

Question 3

What is a change in accounting estimate?

Answer 3

a change in estimates such as; allowance for doubtful accounts, inventory absoloescense, Depreciation methods, useful life of assets

Question 4

How do you treat changes in accounting estimates?

Answer 4

On a Prospective basis.

Question 5

What is the prospective treatment?

Answer 5

Using the new estimates in the current period financial statements and future periods. Do not restate previous versions.

Question 6

How do you disclose the change in accounting estimate?

Answer 6

Disclose the effect on income from continuing operations, net income, and related per share amounts if the change affects several future periods.

Question 7

What is a change in reporting entity?

Answer 7

This occurs when a change in the structure of the organization is made which results in financial statements that represent a different or changed entity.

Question 8

Examples of a change in reporting entity are:

Answer 8

Leaving out a Subsidiary when it is in bankruptcy and being controlled by the bank. Or leaving out a foreign Sub, when it is being controlled by a foreign government

Question 9

How to you treat changes in reporting entity?

Answer 9

On a Retrospective Basis

Question 10

What is the Retrospective Basis treatment?

Answer 10

You just use the new reporting entity in the current accounting period, but you restate the proper year financial statements presented as if it was the same organization as you present the current period in.

Question 11

How do you disclose the change in reporting entity?

Answer 11

Disclose the type of change and the reason for the change, the related effects on income before extraordinary items, net income, other comprehensive income, and related per share effects on EPS for all periods presented

Question 12

What is a change in accounting Principle?

Answer 12

Any change from GAAP policy to another GAAP Policy with the exception in change in depreciation, and amortization, they are changes in accounting estimates

Question 13

How do you treat changes in accounting principles?

Answer 13

On a Retrospective Basis

Question 14

What is an example in a direct effect of a retrospective change in acctg principle that you would apply to past years?

Answer 14

The adjustment to an inventory balance due to a change in inventory valuation method.

Question 15

What is an example of an indirect effect of a retrospective change in acctg principle that you would only recognize in the period the change is made?

Answer 15

The profit sharing or royalty payment based on revenue or net income.

Question 16

What do you do if the cumulative effect of applying the principle can be determined for some, but not all the prior period adjustments needed.

Answer 16

You make the adjustment to the earliest period to which can be calculated, and make an offsetting adjustment to the opening balance of RE for that period

Question 17

How do you disclose the change in accounting principle?

Answer 17

Disclose the nature and reason for the change, method of applying the change, description of prior period information that is retrospectively adjusted, effect of the change on income from continuing operations, net income, per share amount for current and past periods, and a description of the indirect effects of the change and related per share amounts.

Question 18

How does IFERS treat Accounting Changes

Answer 18

On A retrospective Basis

Question 19

When can you change accounting Policies per IFRS?

Answer 19

Anytime the change will result in a more reliable and more relevant presentation of the financial statements.