中级财务会计英文ch_002PPT文档格式.ppt

1、,Accounting Changes and Error Analysis,Chapter 14,Intermediate Accounting12th EditionKieso,Weygandt,and Warfield,Prepared by Coby Harmon,University of California,Santa Barbara,Identify the types of accounting changes.Describe the accounting for changes in accounting principles.Understand how to acco

2、unt for retrospective accounting changes.Understand how to account for impracticable changes.Describe the accounting for changes in estimates.Identify changes in a reporting entity.Describe the accounting for correction of errors.Identify economic motives for changing accounting methods.Analyze the

3、effect of errors.,Learning Objectives,Why are accounting changes made?#New FASB pronouncementsChanging economic conditionsChanging internal circumstances,Accounting Changes Reporting Issues&#Approaches,Essential issues in reporting accounting changes:#Whether an accounting change is allowed.Whether

4、to restate prior years?#financial statements.Whether to recognize the effect of the change in the current years net income or in the beginning retained earnings balance.,Accounting Changes Reporting Issues&#Approaches,Accounting Changes,Error corrections.Are not classified as accounting changes.Do a

5、ffect the income of prior periods and require special treatment.,Accounting Changes,Relevance,Consistency,Public Confidence,Objectives of Reporting Accounting Changes,Accounting Principle Changes,The following are not accounting principle changes:#Initial adoption of an accounting principleAdopting

6、an accounting principle for a new group of assets or liabilities Change from inappropriate accounting principle to GAAPPlanned change to straight-line depreciationChange in accounting principle that cannot be distinguished from a change in accounting estimate,Accounting Principle Changes,Three appro

7、aches for reporting changes:#Currently（cumulative effect）.Retrospectively.Prospectively（in the future）.FASB requires use of the retrospective approach.,Changes in Accounting Principle,A change in an accounting principle is accounted for by the retrospective application of the new accounting principl

8、e.A change in an accounting estimate is accounted for prospectively.A change in a reporting entity is accounted for by the retrospective application of the new accounting principle.A material error is accounted for by prior period restatement（adjustment）.,According to the provisions of FASB No.154:#

9、,Basic Principles,A company accounts for a change in principle by the retrospective application of the new accounting principle as follows:#,The company computes the cumulative effect of the change to the new accounting principle as of the beginning of the first period presented.That is,it computes

10、the amounts that would have been in the financial statements if it had always used the new principle.,Continued,Retrospective Adjustment Method,The company adjusts the carrying values of those assets and liabilities（including income taxes）that are affected by the change.The company makes an offsetti

11、ng adjustment to the beginning balance of retained earnings to report the cumulative effect of the change（net of taxes）for each period presented.,Continued,Retrospective Adjustment Method,The company adjusts the financial statements of each prior period to reflect the specific effects of applying th

12、e new accounting principle.That is,each item in each financial statement that is affected by the change is restated to the appropriate amount under the new accounting principle.The company uses the new accounting principle in its current financial statements.,Continued,Retrospective Adjustment Metho

13、d,The companys disclosures include（a）the nature and reason for the change in accounting principle,including an explanation of why the new principle is preferable,（b）a description of the prior-period information that has been retrospectively adjusted,（c）the effect of the change on income,earnings per

14、 share,and any other financial statement line item for the current period and the prior periods retrospectively adjusted,and（d）the cumulative effect of the change on retained earnings（or other appropriate component of equity）at the beginning of the earliest period presented.,Retrospective Adjustment

15、 Method,The following accounting principle changes are subject to the retroactive approach:#Change from LIFO to another inventory methodChange in the method of accounting for long-term construction contractsChange to or from full-cost method in extractive industriesChanges in accounting principle ma

16、de in conjunction with an initial public offering of equity securities（exemption available only once）,Retrospective Adjustment Method,The following accounting principle changes are subject to the retroactive approach:#Change from retirement/replacement accounting to depreciation accounting for railroad track structuresChange to a principle required by a new pronouncement recognized as GAAP that requires retroactive applicationChange to the equity method of accounting for investments in common stock（sometim