chapter 22 changes in accounting estimates

¡Supera tus tareas y exámenes ahora con Quizwiz!

1. Uncollectible receivables. 2. Inventory obsolescence. 3. Useful lives and salvage values of assets. 4. Periods benefited by deferred costs. 5. Liabilities for warranty costs and income taxes. 6. Recoverable mineral reserves. 7. Change in depreciation methods.

7 items that require estimates

1) new events occur 2) a company acquires more experience 3) as it obtains additional information.

Accounting estimates will change as: (3 possibilities)

change in estimate effected by a change in principle

Another example of a: (vocab) is a change in depreciation (as well as amortization or depletion) methods.

CH 22 ACCOUNTING CHANGES (CHANGE IN ESTIMATES)

CH 22 ACCOUNTING CHANGES (CHANGE IN ESTIMATES)

depreciation

Companies account for a change in ______ methods as a change in estimate effected by a change in accounting principle.

prospectively

Companies report changes in accounting estimates ______

prior reports (1) the period of change if the change affects that period only, (2) the period of change and future periods if the change affects both

Companies report changes in accounting estimates prospectively meaning companies should not adjust ____ ____ instead they account for the effects of all changes in estimates in (2)

changes in estimate.

Companies should consider careful estimates that later prove to be incorrect as:

current and future

Companies should therefore handle a change in estimate revision in the _____ and _____ periods.

book value of asset _______________________________ remaining service life

Depreciation Charge=

Only when a company obviously computed the estimate incorrectly because of lack of expertise or in bad faith should it consider the adjustment an error. (judgement

How does a company determine whether it overlooked the information in earlier periods (an error), or whether it obtained new information (a change in estimate)?

If it is impossible to determine whether a change in principle or a change in estimate has occurred the rule is this: Consider the change as a change in estimate known as : change in estimate effected by a change in accounting principle

Is it a change in principle or a change in estimate when a company changes from deferring and amortizing marketing costs to expensing them as incurred because future benefits of these costs have become doubtful? rule? and is known as: (vocab)

1) REPORTING CURRENT and FUTURE financial statements on the new basis 2) PRESENTING prior period financial statements as previously reported 3) MAKE NO ADJUSTMENTS to the current period opening balances for the effects in prior perods

Make changes in accounting estimate by employing the CURRENT and PROSPECTIVE APPROACH by (3)

normal recurring corrections and adjustments

The FASB views changes in estimates as_____ _____ corrections and adjustments, and thus prohibits retrospective treatment.

1) indicate why the new method is preferable 2) are subject to all other disclosure guidelines established for changes in accounting principle

When a company has a change in estimate effected by a change in accounting principle, it must i In addition, companies are subject to all other disclosure guidelines established for changes in accounting principle.

1) income from continuing operation 2) related per share amounts of the current period.

a change in estimate that affects several periods (such as a change in the service lives of depreciable assets); disclose the effect on

material

companies need not disclose changes in accounting estimates made as part of normal operations, such as bad debt allowances or inventory obsolescence, unless such changes are ______


Conjuntos de estudio relacionados

Eng 3 quiz poetry 80% graphical and structural elements.

View Set

ap euro first semester final review

View Set

NY Real Estate Chapter 3.B: Legal Issues - Liens & Easements

View Set

Galvanize Test Prep's HARD GRE Word List #11

View Set