AFM391 Chapter Notes - Chapter 21: Financial Statement, Accrual, Income Statement
22 Feb 2017
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Chapter 21 - accounting changes and error analysis. Changes in accounting policies and estimates, and errors. Reasons for changes in accounting: new mandated accounting methods or standards, changing economic conditions may cause a company to revise its method of accounting, changes in technology and in operations may require revised estimates, accounting errors are discovered. Accounting changes may result in more useful information, but it reduces comparability and consistency. Concepts: similar under ifrs; primary sources include ifrs and guidance, and then use judgement. Once an appropriate method is chosen from among those allowed, the method is applied consistently to each category: both aspe and ifrs state that pronouncements of standard-setting bodies with similar conceptual frameworks can be used. Example includes going from cash basis to accrual basis. When companies reclassify an item on the financial statements of prior periods to make statements comparable, this is a change in presentation only and not a change in accounting policy.
