As part of the year-end accounting process and review of operating policies, Cullen Co. is considering a change in the accounting for its equipment from the straight-line method to an accelerated method. Your supervisor wonders how the company will report this change in principle. He read in a newspaper article that the FASB has issued a standard in this area and has changed GAAP for a "change in estimate that is effected by a change in accounting principle." (Thus, the accounting may be different from that he learned in intermediate accounting.) Your supervisor wants you to research the authoritative guidance on a change in accounting principle related to depreciation methods.
Access the FASB Codification at http://asc.fasb.org/home to conduct research using the Codification Research System to prepare responses to the following items. Provide Codification references for your responses.
(a) What are the accounting and reporting guidelines for a change in accounting principle related to depreciation methods?
(a) This falls under the guidance of SFAS 154. Changes in depreciation methods are to be reported prospectively, which means that the past periods will not be adjusted to reflect the changes in depreciation expense. There are therefore no restatements needed for the financial statements. The change in depreciation ...
The solution explains the accounting and reporting guidelines for a change in accounting principle related to depreciation methods. FASB Codification references are provided.