Accounting Changes, Estimate Revisions, and Error Corrections

This chapter covers what happens when accounting changes after prior reporting has already occurred. FAR questions here depend on identifying the type of change correctly and then applying the right retrospective or prospective treatment.

In This Chapter

• Accounting Principle Changes and Estimate Revisions separates the major categories.
• Retrospective and Prospective Application of Accounting Changes explains the two main application methods.
• Error Corrections and Prior-Period Adjustments covers treatment of reporting mistakes.

How to Use This Chapter

• Classify the change before deciding how the financial statements change.
• Focus on retrospective versus prospective treatment and when prior periods are restated.
• Return here whenever a FAR miss involves estimate-versus-principle confusion.

In this section

• Accounting Principle Changes and Estimate Revisions
  FAR distinctions between accounting principle changes, estimate revisions, and changes that contain both elements.
• Retrospective and Prospective Application of Accounting Changes
  FAR treatment for retrospective restatement, prospective application, and impracticability in accounting changes.
• Error Corrections and Prior-Period Adjustments
  FAR treatment for correcting prior-period errors, retained earnings adjustments, and comparative financial statement presentation.