| Paragraph No. |
|
| 6 | Types
of
Accounting Changes:
(a) Change in accounting principle. (b) Change in accounting estimate. |
| 7 | Change in Accounting Principle--results from adoption of a generally accepted accounting principle different from the one used previously. |
| 8 | Concerns a choice from among two or more generally accepted accounting principles. Initial adoption of a principle is not a change. |
| 10 | Change in Accounting
Estimate--are consequences of periodic
presentations of
financial
statements.
Result from estimating future events whose effects cannot be perceived with certainty; estimating requires the exercise of judgment. Accounting estimates change as new events occur, as more experience is acquired, or as additional information is obtained. |
| 11 | Change in estimate effected by a change in accounting principle. If inseparable, they are considered as changes in estimate for purposes of applying Opinion 20. |
| 12 | Change in the Reporting Entity--special type of change in accounting principle results in financial statements which are those of a different reporting entity. |
| 13 | Correction of an Error in Previously Issued Financial Statements-- result from mathematical mistakes, mistakes in the application of accounting principles, or oversight or misuse of facts that existed at the time the financial statements were prepared. |
| 14 | Views on a
change in Principle.
(a) Accounting principles should be applied consistently for all periods presented in comparative financial statements. If not, misinterpretation of earnings trends and other analytical data may occur. Where a change in principle occurs, prior period financial statements should be restated when presented in current reports for comparative purposes. (b) Restating financial statements of prior periods may dilute public confidence in financial statements and may confuse those who use them. Financial statements of prior periods prepared on the basis of generally accepted accounting principles at that time should be considered final. (c) Restatement may be difficult and at times impossible. (d) Restatement may require assumptions that furnish results different from what they would have been had the newly adopted been used in prior periods. |
| 15 | Justification for a Change in Accounting Principle -- General presumption - An accounting principle once adopted should not be changed. Consistent use enhances utility of financial statements by facilitating analysis. |
| 16 | General presumption may be overcome only if the enterprise justifies the use of an alternative acceptable accounting principle on the basis that it is preferable. |
| 17 | General Disclosure
for a
Change in Accounting
Principle --
(a) Nature and justification for the change. (b) Effect on income. |
| 18 | Reporting a
Change in Accounting Principle
- General Rule --
(a) Financial statements of prior periods included for comparative purposes should be presented as previously reported. (b) Report cumulative effect of the change in income of the current period in a manner similar to an extraordinary item (between captions extraordinary items and net income). (c) Effect of adopting the new accounting principle on income before extraordinary items and net income (and EPS amounts) of the period of change should be disclosed. (d) Pro Forma (as if) presentations for income before extraordinary items and net income and per share amounts should be shown on face of the income statements for all periods presented as if the newly adopted principle had been applied during all periods affected |
| 27 | Special
Changes
in Accounting Principle--
Applied retroactively - Prior period financial statements are restated to reflect the newly adopted principle. Items requiring retroactive treatment - (a) A change from LIFO method of inventory pricing to some other method. (b) A change in method of accounting for long-term construction contracts. (c) A change to or from the "full cost" method of accounting in the extractive industries. |
| 28 | Nature and justification for a change applied retroactively should be disclosed in the financial statements for the period in which the change was adopted. The effect of the change on income before extraordinary items, net income and related per share amounts should be disclosed for all periods presented. |
| 31 | Reporting a Change
in
Accounting Estimate--Accounting
for in (a) the period of change if the change affects only
that period
or (b) the period of change and future periods if the
change affects
both.
Prior periods not restated and pro forma amounts not reported. |
| 33 | Disclosure--effect on income before extraordinary items, net income and per share amounts of the current period should be disclosed for a change in estimate that affects several future periods. |
| 34 | Reporting a Change in the Entity--restate financial statements of all prior periods presented. |
| 35 | Disclosure--describe the nature of the change and the reason for it. Effect of the change on income before extraordinary items, net income and related per share amounts should be disclosed for all periods presented. |
| 36 | Reporting a Correction of an Error in Previously Issued Financial Statements--correction of an error in financial statements of a prior period discovered subsequent to their issuance should be reported as a prior period adjustment. |
| 37 | Disclosure--the nature of the error and the effect of its correction on income before extraordinary items, net income, and the related per share amounts should be disclosed in the period in which the error was discovered and corrected. |