In this chapter we examine the way accounting changes and error corrections are handled in a variety of situations that might be encountered in practice. We see that most changes in accounting principle are reported retrospectively. Changes in estimates are accounted for prospectively. A change in depreciation methods is considered a change in estimate resulting from a change in principle. Both changes in reporting entities and the correction of errors are reported retrospectively.
Chapter 20: Accounting changes and error corrections. When you finish this chapter, you should: Describe how changes in accounting principle typically are reported, explain how and why some changes in accounting principle are reported prospectively, explain how and why changes in estimates are reported prospectively, describe the situations that constitute a change in reporting entity.
This textbook is organised to provide you with what has been found to be the most appropriate
sequencing of topics as you build the foundations of your accounting knowledge. You will find
that a number of features of the book, properly used, will enhance your understanding and
extend your ability to cope with what will possibly appear, at first, to be a mystifying array of
rules and procedures.
In some cases, there may be reasonable proxies for quantified benefits and costs. For
example, a firm might possess relatively complete technical descriptions of material flows
(inputs, intermediate products, emissions). These material quantities, while not explicitly
translated into financial quantities, may provide rules of thumb that qualitatively inform
decision-making and guard against severe errors in decision-making.
The year 2004 witnessed what was probably the most highly
publicized fingerprint error ever exposed: the case of Brandon Mayfield, an
Oregon attorney and Muslim convert who was held for two weeks as a
material witness in the Madrid bombing of March 11, 2004, a terrorist
attack in which 191 people were killed. Mayfield, who claimed not to have
left the United States in ten years and did not have a passport, was
implicated in this attack almost solely on the basis of a latent fingerprint found on a bag in Madrid containing detonators and explosives in the
aftermath of the bombing.
This version includes amendments resulting from IFRSs issued up to 31 December 2008. IAS 8 Net Profit or Loss for the Period, Fundamental Errors and Changes in Accounting Policies was issued by the International Accounting Standards Committee in December 1993. It replaced IAS 8 Unusual and Prior Period Items and Changes in Accounting Policies (issued in February 1978).
Chapter 4 - The general journal and the general ledger. After reading this chapter, you should be able to: Record transactions in the general journal, prepare compound journal entries, post journal entries to general ledger accounts, correct errors made in the journal or ledger, define the accounting terms new to this chapter.
Common to these episodes is a struggle to manage tensions associated with the (long-
term) movement of accountants into markets that have not been conventionally associated
with their professional expertise and status.
Define what is meant by internal control and describe some key elements of an internal control system for cash receipts and disbursements.
Encourages adherence to company policies and procedures Promotes operational efficiency Minimizes errors and theft...
Governance research in accounting exploits the role of
accounting information as a source of credible information
variables that support the existence of enforceable contracts,
such as compensation contracts with payoffs to managers
contingent on realized measures of performance, the
monitoring of managers by boards of directors and outside
investors and regulators, and the exercise of investor rights
granted by existing securities laws. The remainder of Section 3
is organized as follows. Section 3.
Assume a policy with a $2 million premium that reimburses the policyholder when aggregate
losses for the calendar year exceed $10 million. Assume that the losses covered by the policy are
generally low severity/high frequency, with minimal catastrophe potential (i.e., the policy is
meant to cover mostly pricing risk, not large loss risk). Also assume that the expected losses are
$8 million, and that the expected losses normally occur evenly throughout the year.
After one quarter, losses would have to be 500% of expected for attachment to occur.
Second, we reestimate our baseline specification while adding control variables, ranging
from initial fiscal and current account balances to initial bank credit risk and household debt
levels. These could plausibly have both affected the growth forecast error and been correlated
with fiscal consolidation forecasts. Not controlling for such factors could influence the
estimated relation between fiscal consolidation forecasts and growth forecast errors. We find,
however, that our results are robust to the introduction of such controls.
In earlier book chapters, it was noted that the accounting profession uses an “all inclusive” approach
to measuring income. Virtually all transactions, other than shareholder related transactions like
issuing stock and paying dividends, are eventually channeled through the income statement.
However, there are certain situations where the accounting rules have evolved in sophistication to
provide special disclosures.
Supporters of credit scoring note that credit scores have statistical validity, and are
predictive of repayment behavior for large populations. However, this does not mean
that credit data are error free, nor that credit scoring models are perfect predictors of
individual creditworthiness; it only means that they work on average. While the systems
do present an accurate risk profile of a large numbers of consumers, data users who
manage large numbers of accounts priced by credit risk have a greater tolerance for errors
in credit scoring systems than consumers do.
Life cycle analysis, examining all stages in using a re-
source, is central to the full cost accounting needed
to guide public policy and private investment. A
previous study examined the life cycle stages of oil,
but without systematic quantiﬁcation.
per is intended to advance understanding of the
measurable, quantiﬁable, and qualitative costs of
In order to rigorously examine these different
damage endpoints, we examined the many stages
in the life cycle of coal, using a framework of en-
vironmental externalities, or “hidden costs.
No part of this publication may be reproduced or transmitted in any form or by any means, mechanical or electronic, including photocopying or recording, or by any information storage and retrieval system, or transmitted by email without permission in writing from the author. While all attempts have been made to verify the information provided in this publication, neither the author nor the publisher assumes any responsibility for errors, omissions, or contrary interpretations of the subject matter herein.
Chapter 9 - The implementation of systems and records. In this chapter students will be able to: To be able to specify guidelines and timelines for implementing a system, to understand the importance of contingency planning, to learn about establishing effective training schedules and programs, to learn how data is transferred from one system to another without errors,...
This chapter explores how budgets can be adjusted so that meaningful comparisons to actual costs can be made. This chapter include objectives: Prepare a flexible budget, prepare a report showing activity variances, prepare a report showing revenue and spending variances, prepare a performance report that combines activity variances and revenue and spending variances, prepare a flexible budget with more than one cost driver, understand common errors made in preparing performance reports based on budgets and actual results.
Chapter 8 - Inventories and thecost of goods sold. Upon completion of this lesson, the successful participant will be able to: Explain the need for taking a physical inventory, record shrinkage losses and other year-end adjustments to inventory, explain the effects on the income statement of errors in inventory valuation, estimate the cost of goods sold and ending inventory by the gross profit method and by the retail method,...