Chapter 22-Accounting Changes and Error Analysis Flashcards Preview

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Flashcards in Chapter 22-Accounting Changes and Error Analysis Deck (10)
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1

Change in accounting estimate

A change that occurs as the result of new information or as additional experience is acquired.

2

Change in accounting principle

A change from one generally accepted accounting principle to another generally accepted accounting principle.

3

Change in reporting entity

A change from reporting as one type of entity to another type of entity.

4

Counterbalancing errors

Errors that will be offset or corrected over two periods.

5

Current adjustment

The cumulative effect of the use of the new method on the financial statements at the beginning of the period is computed and is reported in the current year’s income statement as an irregular item.

6

Errors in financial statements

Errors occur as a result of mathematical mistakes, mistakes in the application of accounting principles, or oversight or misuse of facts that existed at the time financial statements were prepared.

7

Noncounterbalancing errors

Errors that are not offset in the next accounting period.

8

Pro-forma statements

Supplementary statements that are shown on an “as if” basis.

9

Prospective adjustment

Previously reported results remain; no change is made. Opening balances are not adjusted, and no attempt is made to allocate charges or credits for prior events.

10

Retrospective adjustment

The cumulative effect of the use of the new method on the financial statements at the beginning of the period is computed and the prior years’ financial statements are recast on a basis consistent with the newly adopted principle.