Chapter 23 Accounting Errors and Changes

By Dante2012, Apr 2012

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Retained earnings changes are	cumulative when presenting comparitive statements with unadjusted beginning retained earnings balance
Change in accounting principle	Retrospective application of the new principle
Change in accounting estimate	accounted for prospectively
Change in reporting entity	retrospective adjustment so that all financial statements are presented for the same entity
Accounting for correction of an error	1 company computes cumulative effect of the error correction on prior financial statements. amount that would be in financial statements if it had not made the error.	2 company adjusts book value of assets and liabilities and taxes affected by error. Company makes offsetting adjustment to beginning balance of retained earnings to report cumulative error correction net of taxes for each period presented
Accounting for correction of an error cont	3 company adjusts financial statements of each prior period to reflect the specific effects of correcting the error. Each item in each financial statement that is affected by the error is restated to appropriate amount	4 discloses nature of the error. effect of correction on each financial statement line item, any per share amounts affected, cumulative effect on change in retained earnings

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