Accounting_changes_and_errors_slides

Accounting_changes_and_errors_slides - Accounting changes...

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Accounting changes and errors
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Accounting changes and errors Page 2 Typical coverage of US GAAP Adoption of a new accounting standard Change in accounting policy Change in accounting estimate Correction of errors Change in reporting entity Disclosures
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Accounting changes and errors Page 3 Executive summary Both IFRS and US GAAP have similar recognition treatment for accounting changes, changes in estimates and corrections of errors. The required disclosures are also similar. IFRS provides an exception if it is impractical to restate financial statements for a correction of an error. US GAAP requires all material errors to be corrected by restating, and does not provide an impractical exception.
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Accounting changes and errors Page 4 Primary pronouncements US GAAP ASC 250, Accounting Changes and Error Corrections IFRS IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors
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Accounting changes and errors Page 5 Progress on convergence There is no convergence activity planned at this time.
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Accounting changes and errors Page 6 Adoption of a new accounting standard Upon adoption of a new accounting standard, the transition guidance in the standard, if any, should be followed. If no guidance is provided, then the new accounting standard should be applied retrospectively, when practical. Similar IFRS US GAAP
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Accounting changes and errors Page 7 Change in accounting policy A change in accounting policy is defined as a change from one generally accepted accounting principle to another generally accepted accounting principle. If practical, the change should be applied retrospectively. The initial adoption of an accounting principle for new events or to account for items that were previously immaterial is not considered a change in accounting. Similar IFRS US GAAP Similar
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Accounting changes and errors Page 8 Change in accounting policy ASC 250-10-45-6, when it is impracticable “to determine the period-specific effects of that change on all prior periods presented, the cumulative effect of the change to the new accounting principle shall be applied to the carrying amounts of assets and liabilities as of the beginning of the earliest period to which the new accounting principle can be applied. An offsetting adjustment, if any, shall be made to the opening balance of retained earnings (or other appropriate components of equity or net assets in the statement of financial position) for that period.” IFRS US GAAP Similar: Per IAS 8, paragraph 25, “when it is impracticable to determine the cumulative effect, at the beginning of the current period, of applying a new accounting policy to all prior periods, the entity shall adjust the comparative information to apply the new accounting policy prospectively from the earliest date practicable.”
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Accounting changes and errors Page 9 Example 1 Toy Company management decides to adopt the FIFO method of inventory valuation at the beginning of 2011.
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This note was uploaded on 09/30/2010 for the course ACCT 3311 taught by Professor Gregsommers during the Spring '10 term at Southern Methodist.

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Accounting_changes_and_errors_slides - Accounting changes...

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