ACCT 3312 appendix A terms

change in accounting estimate

Change that updates the carrying amount of an existing asset/liab because new information becomes available; prospective treatment only

ex: chnage in useful life for dep, change in dep method, change in est sales returns, change in warranty accrual

change in accounting principle

switching from one GAAP principle to another; treated retrospectively
ex: change from LIFO to FIFO, adoption of new leasing standard, change from equity method to fair value method, change in acct for pension g/l

Retrospective

most common; restates all prior period presented, adjust beg RE for cumulative after tax affect, ensures consistency across period

prospective

rate; only allowed if retrospective is impractical

modified retrospective

apply new standard to current period only, cumulative adjustment to beg RE of current period, used when codification update allows it

direct effects

adjust acct balances and RE; always adjust retrospectively

indirect effects

items like bonuses tied to earnings, adjust in current period only

accounting error

occurs when transaction or event is recorded incorrectly or not recordd at all; requires retrospective accct treatment
ex: math errors, misapplication of GAAP, adopting unrealistic assumption in dep calc, failure to accrue for end of period expenses

restatement

amend prior periodic reports for the changes necessary to correct the error

error discovered in same acct period

no impact on prior periods, reverse incorrect entry and record correct entry

error discovered in subsequent acct period: affects BS only or IS only

restmt of all fina stmts presented; record reclassification entry

error discovered in subsequent acct period: affects BS and IS and is counterbalancing

restmt of all fina stmts presented; record corrrecting entry only if discovered before self-correction of the error

error discovered in subsequent acct period: affects BS and IS and is noncounterbalancing

restmt of all fina stmts presented; record entry to correct the error

counterbalancing

error that self corrects withing 2 consecutive periods

change in reporting entity

fina stmts now represent different reporting entities; treated restrospectively