Intermediate Accounting I Chapter 20 - Vocab

Changes in accounting estimates

A change in estimate is reflected in the financial statements of the current period and future periods.

Change in reporting entity

A change in reporting entity requires that financial statements of prior periods be retrospectively revised to report the financial information for the new reporting entity in all periods.

Prior period adjustment

The correction of an error is treated as a prior period adjustment.

Prospective approach

The effects of a change are reflected in the financial statements of only the current and future years under the prospective approach.

Correction of an error

The retrospective approach is used for the correction of errors.

Retrospective approach

The retrospective approach offers consistency and comparability.