Chapter 22: 22-5IFRS (page 1328)
Discuss how a change in accounting policy is handled when it is impracticable to determine previous amounts
Accounting policies are the rules and regulations which are followed to maintain the financial accounts, and the previous amounts should be used.
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If a company registered with the SEC justifies a change in accounting method as preferable under the circumstances, and the circumstances change, can that company switch back to its prior method of accounting before the change? Why or why not?
IFRS requires companies to use which method for reporting changes in accounting policies?
(a) Cumulative effect approach.
(b) Retrospective approach.
(c) Prospective approach.
(d) Averaging approach.
Access the glossary (“Master Glossary”) to answer the following.
(a) What is a change in accounting estimate?
(b) What is a change in accounting principle?
(c) What is a restatement?
(d) What is the definition of “retrospective application”?
Which of the following is true regarding whether IFRS specifically addresses the accounting and reporting for effects of changes in accounting policies?
Direct effects Indirect effects
(a) Yes Yes
(b) No No
(c) No Yes
(d) Yes No
Refer to the accounting change by Wertz Construction Company in BE22-1. Wertz has a profit-sharing plan, which pays all employees a bonus at year-end based on 1% of pre-tax income. Compute the indirect effect of Wertz’s change in accounting principle that will be reported in the 2017 income statement, assuming that the profit-sharing contract explicitly requires adjustment for changes in income numbers.
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