Accounting Changes It is important in accounting theory to be able to distinguish the types of accounting changes: Required: a) If a public company desires to change from the sum-of-year’s-digits depreciation method to the straight-line method for its fixed assets, what type of accounting change will this be? How would it be treated? Discuss the permissibility of this change. b) If a public company obtained additional information about the service lives of some of its fixed assets that showed that the service lives previously used should be shortened, what type of accounting change would this be? Include in your discussion how the change should be reported in the income statement of the year of the change and what disclosures should be made in the financial statements or notes.

Auditing: A Risk Based-Approach (MindTap Course List)
11th Edition
ISBN:9781337619455
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Chapter15: Audit Reports For Financial Statement Audits
Section: Chapter Questions
Problem 12RQSC
icon
Related questions
Question

Accounting Changes
It is important in accounting theory to be able to distinguish the types of accounting changes:
Required:
a) If a public company desires to change from the sum-of-year’s-digits depreciation method to the straight-line method for its fixed assets, what type of accounting change will this be? How would it be treated? Discuss the permissibility of this change.
b) If a public company obtained additional information about the service lives of some of its fixed assets that showed that the service lives previously used should be shortened, what type of accounting change would this be? Include in your discussion how the change should be reported in the income statement of the year of the change and what disclosures should be made in the financial statements or notes.

Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps

Blurred answer
Knowledge Booster
Accounting Changes and Error Analysis
Learn more about
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
  • SEE MORE QUESTIONS
Recommended textbooks for you
Auditing: A Risk Based-Approach (MindTap Course L…
Auditing: A Risk Based-Approach (MindTap Course L…
Accounting
ISBN:
9781337619455
Author:
Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:
Cengage Learning
Intermediate Accounting: Reporting And Analysis
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning
Auditing: A Risk Based-Approach to Conducting a Q…
Auditing: A Risk Based-Approach to Conducting a Q…
Accounting
ISBN:
9781305080577
Author:
Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:
South-Western College Pub
Principles of Accounting Volume 1
Principles of Accounting Volume 1
Accounting
ISBN:
9781947172685
Author:
OpenStax
Publisher:
OpenStax College
Financial Reporting, Financial Statement Analysis…
Financial Reporting, Financial Statement Analysis…
Finance
ISBN:
9781285190907
Author:
James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:
Cengage Learning