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ACFM 322 Chapter 20

TermDefinition
Retrospective Modified Retrospective Prospective What are the 3 approaches to reporting accounting changes?
Retrospective Approach Revise prior years' statements
Modified Retrospective Approach Apply the change in the current period with adjustment to the beginning RE
Change in accounting principle Change in accounting estimate Change in reporting entity What are the 3 types of accounting change?
Change in Accounting Principle Change from one generally accepted principle to another
Retrospectively Most of the changes for changes in accounting principle are accounted for ____________________
Restated All years shown in comparative statements must be ______________
Taxes A change in inventory costing requires a related adjustment for _____________
Justified A change must be ____________ as more appropriate than the previous method
Disclosure Notes ____________________________ should include why the change was made and its effect on financials
Lack of info restricts revision of prior statements It is impracticable to determine some prior-period effects OR the cumulative effect of prior years A new accounting standards update specifically requires prospective accounting Apply the change in the earliest year possible or even prospectively if: (Hint there are 3)
Change in Accounting Estimate Revision of an estimate based on new information or experience
Prospectively The changes for changes in accounting estimate are accounted for ____________________
Estimate & Principle Change in depreciation method is a change in accounting _____________ achieved by a change in accounting __________________
Estimate If uncertain whether it is a change in principle or change in estimate, treat as change in ______________
Change in Reporting Entity Change from reporting as one type of entity to another type
Presenting consolidated financial statements in place of statements of individual companies Changing specific companies that constitute the group for which consolidated or combined statements are prepared This type of change occurs as a result of: (Hint there are 2)
Retrospectively & Prospectively The changes for changes in reporting entity are accounted for ____________________ or ____________________
Restated (Retrospective) If changes in accounting rules result in a change in reporting entity, any prior-period financials presented for comparative purposes must be ____________ to appear as if the new entity existed then
NOT Restated (Prospective) When one company acquires another, financial statements are merged as of the date of acquisition and the acquirer's prior-period financial statements presented for comparison are __________________________
Same Period An error made & discovered in the _______________________ is corrected in that period with a reversal + appropriate entry
Prospectively All other errors are accounting for _______________________
Prior Period Adjustment If RE is incorrect, the correction is reported as a __________________________________ to the beginning balance in the statement of shareholders' equity
Disclosure Note A _________________________ is needed to describe the nature of the error & the impact of its correction on operations
Self-Corrected An error that is discovered after it has _________________ does not require a correcting entry
Journal entry to correct the error Related financials are restated to reflect the proper information An error that affects previous financials but not Net Income or even if it does affect Net Income it includes: (Hint 2 things)
Amendments If Income Taxes are affected, __________________ must be filed and an adjustment is made for additional tax payments or refunds
Created by: MOWGaming04
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