question archive The effects of a change in accounting principle should be recorded on a prospective basis when the change is from the a
The effects of a change in accounting principle should be recorded on a prospective basis when the change is from the a
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The effects of a change in accounting principle should be recorded on a prospective basis when the change is from the
a. The correction of an error in the determination of the last year's inventory
b. Straight line method of depreciation to the double declining balance method.
c. Cost recovery method of accounting to the percentage of completion method.
d. Presentation of statements of individual entities in consolidated statements.
Under IFRS, changes in accounting policies may occur
a. Either when a change is required by an IFRS or when it provides reliable and more relevant information
b. Neither when a change is required by an IFRS nor when it provides reliable and more relevant information
c. Only when a change is required by an IFRS
d. Only when a change provides reliable and more relevant information
Presenting consolidated financial statements this year when statements of individual entities were presented last year is
a. An accounting change that should be reported by restating the financial statements of all prior periods presented.
b. An accounting change that should be reported prospectively
c. Not an accounting change
d. A correction of an error
An entity recently moved to a new building. The old building is being actively marketed for sale, and the entity expects to complete the sale in four months. Each of the following statements is correct regarding the old building, except
a. It will be reclassified as an asset held for sale.
b. It will be classified as a current asset.
c. It will no longer be depreciated.
d. It will be valued at historical cost.
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1. b. Straight line method of depreciation to the double declining balance method.
2. a. Either when a change is required by an IFRS or when it provides reliable and more relevant information
3. a. An accounting change that should be reported by restating the financial statements of all prior periods presented.
4. d. It will be valued at historical cost.
Step-by-step explanation
When there is a change in estimate, account for it in the period of change. If the change affects future periods, then the change will likely have an accounting impact in those periods, as well. A change in accounting estimate does not require the restatement of earlier financial statements, nor the retrospective adjustment of account balances.
An entity is permitted to change an accounting policy only if the change:
- is required by a standard or interpretation; or
- results in the financial statements providing reliable and more relevant information about the effects of transactions, other events or conditions on the entity's financial position, financial performance, or cash flows.
In presenting consolidated financial statements, retrospective application is generally required in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors
All property which are "held for sale" are expected to be sold within the calendar year and are reported under Current Assets which are not depreciated for the current year.
