Why charlfy changes in accounting principles?
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Why do changes in accounting principles require clarification? Is it the same clarification as for changes in accounting estimates? Please explain in detail.
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Solution Summary
The 398 word solution explains the types of changes and the proper accounting treatment for each. Examples are provided for easier understanding.
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First, it is important to remember that a change in accounting principle (from one acceptable method to another acceptable method) is applied retrospectively to the financial statements. That means that if two years of comparable financial statements are presented in the annual report (which is typical), both years must be reworked as if they had been on the new principle for the entire time. Any effects which go back before the two years are reported as a single amount related to a change in principle.
A change in estimate is reported only prospectively - going forward. Because the ...
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