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Irregular Items and Horizontal Analysis

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1. What are examples of irregular items? How does a change in accounting principles affect the financial statements? Who in the company is responsible for the application of a change in an accounting principle? Why?

2. What is a horizontal analysis? What is the value in using horizontal analysis? Why would a company use horizontal analysis? What does this analysis tell you?

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Solution Summary

This solution discusses irregular items, changes in accounting principles, and who in the company responsible for the application of a change in accounting principle. This solution also explains a horizontal analysis, the value in using this type of analysis, and how management can use the information obtained from a horizontal analysis. Detailed explanations are provided.

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1. Irregular items generally fall into one of two main categories, which are irregular items from discontinued operations and irregular items from extraordinary events. An irregular item from discontinued operations is caused from a discontinuance of product lines, segments, divisions, etc. When a company eliminates a major activity, the losses incurred become an irregular item. When there is an unusual, infrequent event, it is considered an irregular item caused by an extraordinary ...

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