Chapter 20-1 - ACG 3141 Chapter 20 Accounting Changes and...

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1 ACG 3141: Chapter 20 Accounting Changes and Error Corrections Part 1 (Class 26)
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2 Topics Differentiate between the three types of accounting changes and between the retrospective and prospective approaches to accounting for and reporting accounting changes. Describe how changes in accounting principle typically are reported. Explain how and why some changes in accounting principle are reported prospectively.
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3 Learning Objectives Differentiate between the three types of accounting changes and between the retrospective and prospective approaches to accounting for and reporting accounting changes.
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4 Accounting Changes                                                                                                    
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5 Error corrections are . . . Transactions that are either recorded incorrectly or not recorded at all. Not actually accounting changes, but are accounted for similarly. Accounting Changes
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6 Accounting Changes and Error Corrections Retrospective Two Reporting  Approaches Prospective  involves the restatement of prior year’s financial statements affects the financial statements in current and future years only
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7 Retrospective Two Reporting  Approaches Prospective  Revise prior year’s statements that are presented for comparative purposes to reflect the impact of the change. The balance in each account affected is revised to   appear as if the newly adopted accounted method   had been applied all along or that the error had   never occurred. Adjust the beginning balance of retained earnings   for the earliest period reported. Accounting Changes and Error Corrections
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8 Retrospective Two Reporting  Approaches Prospective  The change is implemented in the current period and its effects are reflected in the financial statements of the current and future years only. Prior years’ statements are not revised. Account balances are not revised. Accounting Changes and Error Corrections
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9 Learning Objectives Describe how changes in accounting principle typically are reported.
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Consistency Comparability Qualitative Characteristics Although consistency and comparability are desirable, changing to a new method is sometimes appropriate. Change in Accounting Principle
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This note was uploaded on 10/28/2009 for the course ACG 3141 taught by Professor Graybeal during the Spring '08 term at University of Central Florida.

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Chapter 20-1 - ACG 3141 Chapter 20 Accounting Changes and...

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