M351_Notes-Day_24_Chg-Err_1

M351_Notes-Day_24_Chg-Err_1 - 22-4 and 22-5 on pages 1158...

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A. Changes in accounting principle : Report retrospectively (go back and change (write over) presented statement amounts as if the company had always been on the new accounting principle). See Illustrations 22-1, 22-2, and 22-3, 22-4 and 22-5 on pages 1155-1159 for an example of retrospective accounting principle change (LIFO to FIFO). Because retrospective adjustments involve presenting the direct effects of changing presented amounts for both past years and current years, recognizing a retrospective adjustment involves writing over changed amounts (Illustration
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Unformatted text preview: 22-4 and 22-5 on pages 1158 and 1159) for previous periods and a journal entry to change affected amounts for the current period. Write overs are not made for indirect effects of retrospective adjustments B. Changes in accounting estimates : Report prospectively (change presented current period and future amounts. See the list on the top of page 1164 for financial statements requiring estimates, and are likely to require change in estimates. C. Changes in depreciation methods are accounted for as changes in estimate effected by changes in accounting principle . 1...
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