CONNECT F/ INTERMEDIATE ACCTING>I<
10th Edition
ISBN: 9781260951585
Author: SPICELAND
Publisher: MCG
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Textbook Question
Chapter 20, Problem 20.10Q
For financial reporting, a reporting entity can be a single company, or it can be a group of companies that reports a single set of financial statements. When changes occur that cause the financial statements to be those of a different reporting entity, we account for the situation as a change in reporting entity. What are the situations deemed to constitute a change in reporting entity?
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Accounting estimates are those adopted by an entity in preparing and presenting its financial statements.TRUE or FALSE
Choose the incorrect statement below:A. An entity shall select and apply different accounting policies each period in order to achieve comparability of financial statements.B. A change in reporting entity is actually a change in accounting policy and therefore shall be treated retrospectively to disclose what the statements would have looked like if the current entity had been in existence in the prior year.C. Prior period errors are retrospectively corrected by adjusting the beginning balance of retained earnings and affected assets and liabilities.D. Changes in accounting estimates are to be handled currently and prospectively, if necessary.
In the realm of financial accounting, how do accounting policies, changes in accounting estimates, and errors influence the accuracy and reliability of a company's financial statements? Illustrate each concept with a practical scenario and detail the necessary adjustments or disclosures that might be required to ensure transparent and accurate financial reporting.
Chapter 20 Solutions
CONNECT F/ INTERMEDIATE ACCTING>I<
Ch. 20 - Prob. 20.1QCh. 20 - There are three basic accounting approaches to...Ch. 20 - Prob. 20.3QCh. 20 - Lynch Corporation changes from the...Ch. 20 - Sugarbaker Designs Inc. changed from the FIFO...Ch. 20 - Most changes in accounting principles are recorded...Ch. 20 - Southeast Steel, Inc., changed from the FIFO...Ch. 20 - Prob. 20.8QCh. 20 - Its not easy sometimes to distinguish between a...Ch. 20 - For financial reporting, a reporting entity can be...
Ch. 20 - Prob. 20.11QCh. 20 - Describe the process of correcting an error when...Ch. 20 - Prob. 20.13QCh. 20 - If it is discovered that an extraordinary repair...Ch. 20 - Prob. 20.15QCh. 20 - Prob. 20.5ECh. 20 - FASB codification research LO202 Access the FASB...Ch. 20 - Classifying accounting changes LO201 through...Ch. 20 - Classifying accounting changes and errors LO201...Ch. 20 - Prob. 20.3DMPCh. 20 - Analysis Case 204 Change in inventory methods;...Ch. 20 - Prob. 20.11DMP
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Describe a change in a reporting entity. How does a company account for such changes?arrow_forwardThat a business may only report activities on financial statements that are specifically related to company operations, not those activities that affect the owner personally, is known as which of the following? A. separate entity concept B. monetary measurement concept C. going concern assumption D. time period assumptionarrow_forwardThe accounting and auditing literature discusses several different types of accounting changes. For each of the changes listed below (a. through c.), indicate whether the auditor should add a paragraph to the audit report, assuming that the change had a material effect on the financial statements and was properly justified, accounted for, and disclosed. Assume that the organization is a U.S. non-public company. a. Change from one GAAP to another GAAP b. Change in accounting estimate not affected by a change in accounting principle c. Change in accounting estimate affected by a change in accounting principle d. Correction of an error c. Change from non-GAAP to GAAP (a special case of correction of an error)arrow_forward
- What accounting policies are disclosed in the notes accompanying a companys financial statements? Why is this disclosure important?arrow_forwardAccording to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, an entity must select and apply its accounting policies consistently from one period to the next and among various items in the financial statements. However, an entity may change its accounting policies under certain conditions. Required: Identify the circumstances under which it may be appropriate to change accounting policy in accordance with the guidance given in IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors.arrow_forwardWhich of the following information is not specifically a required disclosure in relation to financial statements? a. Name of the reporting entity or other means of identification and any change in that information from the previous year b. Names of major shareholders of the entity c. Level of rounding used in presenting the financial statements d. Whether the financial statements cover the individual entity or a group of entitiesarrow_forward
- Which is not a purpose of the conceptual framework?a. To provide definitions of key terms and fundamental concepts.b. To provide specific guidelines for resolving situations not covered by existing accounting standards.c. To assists accountants in selecting among alternative accounting and reporting methods.d. To assists the International Accounting Standards Board in standard-setting process. 37. Which of the following statements regarding the conceptual framework is incorrect?a. The conceptual framework is concerned with general-purpose financial statements.b. The conceptual framework applies to financial statements of business reporting enterprises both inthe private sector and in the public sectorc. In cases where there is conflict between the conceptual framework and PFRS, the requirement of theconceptual framework will prevaild. The conceptual framework deals with concepts of capitalarrow_forwardChanges in accounting policy are Permitted if the change will result in a more reliable and more relevant presentation of the financial statements. Permitted if the entity encounters new transactions, events or conditions that are substantively different from existing or previous transactions. Required for all material transactions. Required if an alternate accounting policy gives rise to a material change in assets, liabilities or the current year net income.arrow_forwardIFRS requires companies to use which method for reporting changes in accounting policies? a.   Cumulative effect approach. b.   Retrospective approach. c.   Prospective approach. d.   Averaging approach.arrow_forward
- When a change in accounting policy occurs, what is the indirect effect? Briefly discuss the technique used by the International Financial Documenting Standards (IFRS) to reporting the indirect consequences of a change in accounting policy.arrow_forwardWhich of the following standards set the required disclosures forconsolidated financial statements? a. IFRS 3 – Business Combinationb. IFRS 10 – Consolidated Financial Statementsc. IFRS 12 – Disclosure of Interest in Other Entitiesd. IAS 8 – Accounting Policies, Changes in Accounting Estimates and Errorsarrow_forwardA summary of the company’s significant accounting policies is a required disclosure. Why is this disclosureimportant to external financial statement users?arrow_forward
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