Explore BrainMass
Share

Reporting changes in accounting principle for depreciation.

This content was STOLEN from BrainMass.com - View the original, and get the already-completed solution here!

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.

Instructions

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?

© BrainMass Inc. brainmass.com October 25, 2018, 6:51 am ad1c9bdddf
https://brainmass.com/business/accounting/reporting-changes-in-accounting-principle-for-depreciation-478507

Solution Preview

(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 ...

Solution Summary

The solution explains the accounting and reporting guidelines for a change in accounting principle related to depreciation methods. FASB Codification references are provided.

$2.19
See Also This Related BrainMass Solution

Financial Statements: Relationship between asset values on the balance sheet to market values of assets

Comment on the statement following, focusing on the relation between asset values on the balance sheet to market values of assets. Please assist with getting me started.

A manager complained about the amount of depreciation charged on the plant for which he was responsible: "The market value of my plant just continues to increase, yet I am hit with large depreciation charges on my income statement and the value of my plant and equipment on the balance sheet goes down each year. This doesn't seem fair."

Comment on this statement, focusing on the relation between asset values on the balance sheet to market values of assets. Do not simply "define" depreciation" and "explain it to the manager! The scenario suggests that assets owned might increase in market value (for example, the market value of my house has increased substantially since purchase) but always decrease in "balance sheet value."

View Full Posting Details