Access the FASB Codification at http://asc.fasb.orgAtome to prepare responses to
ID: 2487052 • Letter: A
Question
Access the FASB Codification at http://asc.fasb.orgAtome to prepare responses to the following exercises. Provide Codification references for your responses. CE22-1 Access the glossary ("Master Glossary") to answer the following. What is a change in accounting estimate? What is a change in accounting principle? What is a restatement? What is the definition of "retrospective application"? CE22-2 When a company has to restate its financial statements to correct an error, what information must the company disclose? CE22-3 What reporting requirements does retrospective application require? CE22-4 If a company registered with the SEC justifies a change in accounting method as preferable under the circumstances, and the circumstances change; can that company switch back to its prior method of accounting before the change? Why or why not?Explanation / Answer
Ans-
As per FASB
"This Statement also requires that a change in depreciation, amortization, or depletion method for long-lived, nonfinancial assets be accounted for as a change in accounting estimate effected by a change in accounting principle"
It means if any changes in depreciation for non-financial assets affected by accounting principal it would be considered as a change in account estimate.
Change in accounting principle
A change in accounting principle is where a business entity changes the method of recording particular transactions like changing LIFO to FIFO method for inventory valuation.
Restatement
Restatement means the reissue of earlier published financial statements to display the correction of any errors recurred.
Definition of retrospective application-
"This Statement defines a retrospective application as the application of a different accounting principle to prior accounting periods as if that principle had always been used or as the adjustment of previously issued financial statements to reflect a change in the reporting entity.
This Statement also redefines restatement as the revising of previously issued financial statements to reflect the correction of an error"