中级财务会计英文ch14.pptx

;Identify the types of accounting changes. Describe the accounting for changes in accounting principles. Understand how to account for retrospective accounting changes. Understand how to account for impracticable changes. Describe the accounting for changes in estimates. Identify changes in a reporting entity. Describe the accounting for correction of errors. Identify economic motives for changing accounting methods. Analyze the effect of errors.;;;;;;;;Three approaches for reporting changes: Currently (cumulative effect). Retrospectively. Prospectively (in the future). FASB requires use of the retrospective approach.;A change in an accounting principle is accounted for by the retrospective application of the new accounting principle. A change in an accounting estimate is accounted for prospectively. A change in a reporting entity is accounted for by the retrospective application of the new accounting principle. A material error is accounted for by prior period restatement (adjustment).;A company accounts for a change in principle by the retrospective application of the new accounting principle as follows:;The company adjusts the carrying values of those assets and liabilities (including income taxes) that are affected by the change. The company makes an offsetting adjustment to the beginning balance of retained earnings to report the cumulative effect of the change (net of taxes) for each period presented.;The company adjusts the financial statements of each prior period to reflect the specific effects of applying the new accounting principle. That is, each item in each financial statement that is affected by the change is restated to the appropriate amount under the new accounting principle. The company uses the new accounting principle in its current financial statements.;The company’s disclosures include (a) the nature and reason for the change in accounting principle, including an explanation of why the new principle is preferable, (b) a description of the pri