Chapter 22 - Accounting changes and error analysis. In this chapter students will be able to: Identify the two types of accounting changes, describe the accounting for changes in accounting policies, understand how to account for retrospective accounting changes, understand how to account for impracticable changes, describe the accounting for changes in estimates. | PREVIEW OF CHAPTER 22 Intermediate Accounting 16th Edition Kieso ● Weygandt ● Warfield Identify types of accounting changes and understand the accounting for changes in accounting principles. Describe the accounting for changes in estimates and changes in the reporting entity. LEARNING OBJECTIVES Describe the accounting for correction of errors. Analyze the effect of errors. After studying this chapter, you should be able to: Accounting Changes and Error Analysis 22 LO 1 Types of Accounting Changes: Change in Accounting Policy. Changes in Accounting Estimate. Change in Reporting Entity. Errors are not considered an accounting change. Accounting Alternatives: Diminish the comparability of financial information. Obscure useful historical trend data. ACCOUNTING CHANGES LO 1 Average cost to LIFO. Completed-contract to percentage-of-completion method. Change from one accepted accounting policy to another. Examples include: Changes in Accounting Principle Adoption of a new principle in recognition of events that have occurred for the first time or that were previously immaterial is not an accounting change. LO 1 Three approaches for reporting changes: Currently. Retrospectively. Prospectively (in the future). FASB requires use of the retrospective approach. Rationale - Users can then better compare results from one period to the next. LO 1 Changes in Accounting Principle The cumulative-effect approach results in a loss of comparability. Also, reporting the cumulative adjustment in the period of the change can significantly affect net income, resulting in a misleading income fi example, at one time Chrysler Corporation changed its inventory accounting from LIFO to FIFO. If Chrysler had used the cumulative-effect approach, it would have reported a $53,500,000 adjustment to net income. That adjustment would have resulted in net income of $45,900,000, instead of a net loss of $7,600,000. A second case: In the early 1980s, the railroad industry switched from the . | PREVIEW OF CHAPTER 22 Intermediate Accounting 16th Edition Kieso ● Weygandt ● Warfield Identify types of accounting changes and understand the accounting for changes in accounting principles. Describe the accounting for changes in estimates and changes in the reporting entity. LEARNING OBJECTIVES Describe the accounting for correction of errors. Analyze the effect of errors. After studying this chapter, you should be able to: Accounting Changes and Error Analysis 22 LO 1 Types of Accounting Changes: Change in Accounting Policy. Changes in Accounting Estimate. Change in Reporting Entity. Errors are not considered an accounting change. Accounting Alternatives: Diminish the comparability of financial information. Obscure useful historical trend data. ACCOUNTING CHANGES LO 1 Average cost to LIFO. Completed-contract to percentage-of-completion method. Change from one accepted accounting policy to another. Examples include: Changes in Accounting Principle Adoption of a new principle in .
