[经济学]Intermediate Accounting 6e Spiceland Chap020_answer.docVIP

Chapter 20 Accounting Changes and Error Corrections Questions for Review of Key Topics Question 20-1 Accounting changes are categorized as: 1. Changes in principle (when companies switch from one acceptable accounting method to another) 2. Changes in estimate (when new information causes companies to revise estimates made previously) 3. Changes in reporting entity (the group of companies comprising the reporting entity changes) Question 20-2 Accounting changes can be accounted for: 1. Retrospectively (prior years revised), or 2. Prospectively (only current and future years affected). Question 20-3 In general, we report voluntary changes in accounting principles retrospectively. This means revising all previous period’s financial statements as if the new method were used in those periods. In other words, for each year in the comparative statements reported, we revise the balance of each account affected. Specifically, we make those statements appear as if the newly adopted accounting method had been applied all along. Also, if retained earnings is one of the accounts whose balance requires adjustment (and it usually is), we revise the beginning balance of retained earnings for the earliest period reported in the comparative statements of shareholders’ equity (or statements of retained earnings if they’re presented instead). Then we create a journal entry to adjust all account balances affected as of the date of the change. In the first set of financial statements after the change, a disclosure note would describe the change and justify the new method as preferable. It also would describe the effects of the change on all items affected, including the fact that the retained earnings balance was revised in the statement of shareholders’ equity. Answers to Questions (continued) Question 20-4 Lynch should report its change in depreciation method as a change in estimate, rather than as a change in accounting principle. This is because a change in depreciation