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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
Publisher: Cengage Learning
ISBN: 9781337788281
BuyFind

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
Publisher: Cengage Learning
ISBN: 9781337788281

Solutions

Chapter
Section
Chapter 22, Problem 1GI
Textbook Problem

Describe the three types of accounting changes.

Expert Solution
To determine

Explain the three types of accounting changes.

Explanation of Solution

Accounting changes: When a company requires to sacrifice the consistent accounting methods and procedures, to enhance the usefulness and relevance of the accounting information, those changes are referred to as accounting changes. Such inevitable accounting changes decrease the comparability and consistency of accounting information. The reasons for accounting changes could be new methods introduced by FASB (Financial Accounting Standards Board), changes in accounting principles, and changes in accounting estimates.

The following are the three types of accounting changes:

  • Change in an accounting principle: This change occurs when a company decides to change from an accounting principle to another, like change from LIFO to FIFO. A change in accounting principle effects the values that impact the figures of previous and current years, thus, impairs the consistency and comparability. Hence, the changes in accounting principle should be adjusted with a retrospective effect to impact the previous financial statements, to increase the comparability and the consistency of the values between the previous and current accounting periods.
  • Change in an accounting estimate: This change occurs when a company decides to change the estimates based on the additional information or future events. A change in accounting estimate results out of new experiences and effects the values of current and future period only, but not the previous periods. Hence, the changes in accounting estimates should be accounted for prospectively.
  • Change in a reporting entity: A change in reporting entity occurs due to changes in ownership and operating control due to acquisition. Hence, the changes in reporting entity should be adjusted with a retrospective effect to represent the parent and subsidiary companies as one entity.

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Chapter 22 Solutions

Intermediate Accounting: Reporting And Analysis
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Ch. 22 - How is a change in depreciation method accounted...Ch. 22 - Describe a change in a reporting entity. How does...Ch. 22 - How does a company report an error of a prior...Ch. 22 - Describe two errors that affect only a companys...Ch. 22 - Describe two errors that affect only a companys...Ch. 22 - What is a counterbalancing error? Describe two...Ch. 22 - What is a noncounter balancing error? Describe two...Ch. 22 - Why does a company correct errors even after they...Ch. 22 - How does the accounting for an indirect effect of...Ch. 22 - If a company that uses IFRS discovers an error but...Ch. 22 - The cumulative effect of an accounting change...Ch. 22 - When a change in accounting principle is made...Ch. 22 - On January 1, 2019, Belmont Company changed its...Ch. 22 - A change in the expected service life of an asset...Ch. 22 - During 2019, White Company determined that...Ch. 22 - Generally, how should a change in accounting...Ch. 22 - On January 2, 2017, Garr Company acquired...Ch. 22 - A company has included in its consolidated...Ch. 22 - Shannon Corporation began operations on January 1,...Ch. 22 - Shannon Corporation began operations on January 1,...Ch. 22 - The two methods of reporting an accounting change...Ch. 22 - Heller Company began operations in 2019 and used...Ch. 22 - Refer to RE22-2. Assume the pretax cumulative...Ch. 22 - Refer to RE22-2. Assume Heller Company had sales...Ch. 22 - Bloom Company had beginning unadjusted retained...Ch. 22 - Suppose that Blake Companys total pretax...Ch. 22 - Bliss Company owns an asset with an estimated life...Ch. 22 - At the end of 2019, Framber Company received 8,000...Ch. 22 - At the end of 2019, Cortex Company failed to...Ch. 22 - At the end of 2019, Jayrad Company paid 6,000 for...Ch. 22 - At the end of 2019, Manny Company recorded its...Ch. 22 - Abrat Company failed to accrue an allowance for...Ch. 22 - The following are independent events: a. Changed...Ch. 22 - The following are independent events: a. Changed...Ch. 22 - The following are independent events: a. A...Ch. 22 - Change in Inventory Cost Flow Assumption At the...Ch. 22 - Fava Company began operations in 2018 and used the...Ch. 22 - Berg Company began operations on January 1, 2019,...Ch. 22 - Delta Oil Company uses the successful-efforts...Ch. 22 - In 2020, Frost Company, which began operations in...Ch. 22 - Gundrum Company purchased equipment on January 1,...Ch. 22 - Newton Company introduced a line of laptop...Ch. 22 - On January 1, 2014, Klinefelter Company purchased...Ch. 22 - The following are independent errors made by a...Ch. 22 - The following are independent errors made by a...Ch. 22 - Refer to the information in E22-13. Required:...Ch. 22 - The following are independent errors: a. In...Ch. 22 - Dudley Company failed to recognize the following...Ch. 22 - On January 2, 2019, Quo Inc. hired Reed as its...Ch. 22 - At the beginning of 2020, Flynne Company decided...Ch. 22 - Koopman Company began operations on January 1,...Ch. 22 - Schmidt Company began operations on January 1,...Ch. 22 - Since Goode Oil Company was formed in 2018, it has...Ch. 22 - Kraft Manufacturing Company manufactures two...Ch. 22 - Jackson Company has decided to issue common stock...Ch. 22 - At the beginning of 2020, Holden Companys...Ch. 22 - At the end of 2020, while auditing Sandlin...Ch. 22 - At the beginning of 2020, Tanham Company...Ch. 22 - A review of Anderson Corporations books indicates...Ch. 22 - Cask Companys bookkeeper, who has maintained its...Ch. 22 - Gray Companys financial statements showed income...Ch. 22 - Ingalls Corporation is in the process of...Ch. 22 - There are three types of accounting changes:...Ch. 22 - The various types of accounting changes may...Ch. 22 - Berkeley Company, a manufacturer of many different...Ch. 22 - When the FASB issues a new generally accepted...Ch. 22 - It is important in accounting theory to be able to...Ch. 22 - In 2001, Enron Corporation filed financial...Ch. 22 - You are auditing the financial records of a...Ch. 22 - Disclosures Obtain Kelloggs 2017 annual report...Ch. 22 - Obtain LVMH (Moet Hennessy 2 Louis Vuitton)s 2017...Ch. 22 - Sometimes a business entity may change its method...

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