中級財務(wù)會計英文ch14

1、chapter 14-1intermediate accounting12th editionkieso, weygandt, and warfield prepared by coby harmon, university of california, santa barbarachapter 14-2chapter 14-3chapter 14-4chapter 14-5type of accounting changedefinitionchange in accounting principlereplaces one gaap with anotherchange in accoun

2、ting estimatesubstitutes one good-faith estimate for another, according to new information or conditionschange in reporting entityresults in financial statements of a different reporting entitychapter 14-6type of accounting changedefinitionchange in accounting principlereplaces one gaap with another

3、change in accounting estimatesubstitutes one good-faith estimate for another, according to new information or conditionschange in reporting entityresults in financial statements of a different reporting entityerror corrections . . . are not classified as accounting changes. do affect the income of p

4、rior periods and require special treatment.chapter 14-7relevanceconsistencypublic confidencechapter 14-8chapter 14-9chapter 14-10three approaches for reporting changes: 1)currently (cumulative effect).2)retrospectively.3)prospectively (in the future).4)fasb requires use of the retrospective approach

5、.chapter 14-11according to the provisions of fasb no. 154:chapter 14-12a company accounts for a change in principle by the retrospective application of the new accounting principle as follows:1. the company computes the cumulative effect of the change to the new accounting principle as of the beginn

6、ing of the first period presented. that is, it computes the amounts that would have been in the financial statements if it had always used the new principle.chapter 14-132. the company adjusts the carrying values of those assets and liabilities (including income taxes) that are affected by the chang

7、e. the company makes an offsetting adjustment to the beginning balance of retained earnings to report the cumulative effect of the change (net of taxes) for each period presented.chapter 14-143. the company adjusts the financial statements of each prior period to reflect the specific effects of appl

8、ying the new accounting principle. that is, each item in each financial statement that is affected by the change is restated to the appropriate amount under the new accounting principle. the company uses the new accounting principle in its current financial statements.chapter 14-154. the companys di

9、sclosures include (a) the nature and reason for the change in accounting principle, including an explanation of why the new principle is preferable, (b) a description of the prior-period information that has been retrospectively adjusted, (c) the effect of the change on income, earnings per share, a

10、nd any other financial statement line item for the current period and the prior periods retrospectively adjusted, and (d) the cumulative effect of the change on retained earnings (or other appropriate component of equity) at the beginning of the earliest period presented.chapter 14-16chapter 14-17ch

11、apter 14-18example (retrospective change) buildmore construction company used the completed contract method to account for long-term construction contracts for financial accounting and tax purposes in 2007, its first year of operations. in 2008, the company decided to change to the percentage-of-com

12、pletion method for financial accounting purposes. income before long-term contracts and taxes in 2007 and 2008 was $80,000 and $100,000. the tax rate is 40% and the company will continue to use the completed contract method for tax purposes.chapter 14-19example income from long-term contractschapter

13、 14-20example comparative income statementschapter 14-21example retained earnings statementchapter 14-22impracticabilitycompanies should not use retrospective application if one of the following conditions exists:1. company cannot determine the effects of the retrospective application.2. retrospecti

14、ve application requires assumptions about managements intent in a prior period.3. retrospective application requires significant estimates that the company cannot develop.if any of the above conditions exists, the company prospectively applies the new accounting principle.chapter 14-23summary of the

15、 approach for changes in accounting estimateschapter 14-24the following items require estimates.1.uncollectible receivables.2.inventory obsolescence.3.useful lives and salvage values of assets.4.periods benefited by deferred costs.5.liabilities for warranty costs and income taxes.6.recoverable miner

16、al reserves.7.change in depreciation methods.companies report prospectively changes in accounting estimates.chapter 14-25chapter 14-26chapter 14-27depreciation expense 19,375accumulated depreciation 19,375journal entry for 2005chapter 14-28examples of a change in reporting entity are:1.presenting co

17、nsolidated statements in place of statements of individual companies.2.changing specific subsidiaries that constitute the group of companies for which the entity presents consolidated financial statements.3.changing the companies included in combined financial statements.4.changing the cost, equity,

18、 or consolidation method of accounting for subsidiaries and investments.reported by changing the financial statements of all priorperiods presented.chapter 14-29summary of the approach for changes in reporting entitychapter 14-30chapter 14-31i wonder why companies make accounting changes? it seems l

19、ike a lot of trouble to me!chapter 14-32accounting errors include the following types:1.a change from an accounting principle that is not generally accepted to an accounting principle that is acceptable. 2.mathematical mistakes.3.changes in estimates that occur because a company did not prepare the

20、estimates in good faith. 4.failure to accrue or defer certain expenses or revenues.5.misuse of facts.6.incorrect classification of a cost as an expense instead of an asset, and vice versa.chapter 14-33all material errors must be corrected. record corrections of errors from prior periods as an adjust

21、ment to the beginning balance of retained earnings in the current period. such corrections are called prior period adjustments.for comparative statements, a company should restate the prior statements affected, to correct for the error.chapter 14-34a company accounts for a change in accounting princ

22、iple by prior period restatement as follows:chapter 14-352. the company adjusts the carrying values of those assets and liabilities (including income taxes) that are affected by the error. the company makes an offsetting entry to the beginning balance of retained earnings to report the cumulative ef

23、fect of the error correction (net of taxes) for each period presented.chapter 14-36chapter 14-37chapter 14-38woods, inc.statement of retained earningsfor the year ended december 31, 2007balance, january 11,050,000$ net income360,000 dividends(300,000) balance, december 311,110,000$ before issuing the report for the year ended december 31, 2007, you discover a $62,500 error that caused the 2006 inventory to be overstated (overstated inventory caused cogs to be lower and thus net income to be higher in 2006). would this discovery have any impact on th