Chapter 23 Accounting Changes and Error Analysis23章会计变更和误差分析.pptVIP

Intermediate Accounting, 10th Edition, Chapter 23 (Kieso et al.) Types of Accounting Changes APB Opinion No 20 limits the flexibility in accounting treatments for similar situations The types of accounting changes are: Changes in Accounting Principle Changes in Accounting Estimates Changes in Reporting Entity Errors in Financial Statements Changes in Accounting Principle A changes in principle involves a change from one generally accepted principle to another A change in principle does not result from the adoption of a new accounting principle A change to a generally accepted principle (from an incorrect principle) is a correction of an error Changes in Accounting Principle Changes in accounting principle are classified into: Cumulative-effect type of accounting change Retroactive-effect type of accounting change Change to the LIFO method of inventory Cumulative-Effect Type of Accounting Change The catch up method should be used to account for these changes Financial statements for prior periods are not restated For all prior periods, the following items are shown on an as-if basis (as if the new principle had been applied): income before extraordinary items net income Cumulative-Effect Type of Accounting Change The adjusting entry is effective as of the beginning of the year Pro forma information is shown only as supplementary information Such information may be reported: in the income statement in a separate schedule in the notes to the financial statements Cumulative Effect: Example XYZ company changes from the sum-of-the-years’ digits method to the straight line method of depreciation. The depreciation amounts are: Year SYD ST.LINE 2000 $15,000 $8,000 2001 $14,000 $8,000 The company’s tax rate is 40% Record the change as of the beginning of 2002 Cumulative Effect: Example Year SYD SL Diff Tax Effect 2000 $15,000 $8,000 $7,000 $2,800 2001 $14,000 $8,000 $6,000 $2,400