Chapter+21+Lesson+_1+outline

Chapter+21+Lesson+_1+outline - Chapter 21...

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    Chapter 21 Chapter 21     Accounting Changes and Error Analysis Accounting Changes and Error Analysis
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2 Accounting Changes Accounting Changes and Error Analysis and Error Analysis Changes in Accounting Changes in Accounting Policies and Estimates, Policies and Estimates, and Errors and Errors Types of accounting changes •Alternative accounting methods Accounting standards Retrospective application – change in accounting policy Retrospective restatement – correction of error •Prospective application •Summary of accounting changes IFRS and Private IFRS and Private Enterprise GAAP Enterprise GAAP Comparison Comparison Comparison of IFRS and private enterprise GAAP Adoption of IFRS Adoption of accounting standards for private enterprises (ASPE) •Looking ahead Perspectives Perspectives Motivations for change •Interpreting accounting changes
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3 Types of Accounting Changes Types of Accounting Changes 1. Change in Accounting Policy 2. Change in Accounting Estimate
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4 Types of Accounting Changes  Types of Accounting Changes  (continued) (continued) 3. Correction of an error in prior period financial statements
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5 Changes in Accounting Policy Changes in Accounting Policy Under IFRS, change in an accounting policy is permitted only when the change: 1. Or 2. .
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6 Changes in Accounting Policy Changes in Accounting Policy Under accounting standards for private enterprises, there is a third type of policy change permitted (voluntary): 3. Between or among allowed PE GAAP accounting options for:
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7 Changes in Accounting Policy Changes in Accounting Policy Does not result from adoption of a: 1. . 2. .
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8 Changes in Accounting Policy Changes in Accounting Policy Examples of situations that are not changes in accounting policy: Adopting interest capitalization during construction of own long-term assets, when company had not previously been involved in self-construction Deferral of development expenditures when previously these expenses were expensed as they were immaterial
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9 Changes in Accounting Estimates Changes in Accounting Estimates Future conditions and events and their effects cannot be known with certainty; therefore estimation requires exercise of judgement Use of reasonable estimates is essential to the accounting process and does not undermine the reliability of financial statements
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10 Changes in Accounting Estimates Changes in Accounting Estimates Examples of items requiring estimates include: Uncollectible receivables Inventory obsolescence Fair value of financial assets/liabilities Useful lives and residual values of depreciable assets Liabilities for warranty costs and income taxes
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11 Changes in Accounting Estimates Changes in Accounting Estimates
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This note was uploaded on 12/16/2011 for the course ACTG 3P33 taught by Professor N-a during the Fall '08 term at Brock University, Canada.

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Chapter+21+Lesson+_1+outline - Chapter 21...

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