University:
Cypress College
Course:
ACCT 101 C | Financial Accounting
Academic year:

2020
Views:

397

Pages:

2
Author:

Chanel Lloyd

Notes for the Final, Post-Presentation, Change in Accounting Policies Post-Presentation For profit items, adjustments for income and expenses related to errors or omissions in current financial statements should be justified in the current year and disclosed to the P&L account. For changes in accounting policies, the following are required: Reasons for change should be discussed. The effect of the change on the financial statements should be disclosed. Reasons for Change To comply with relevant accounting standards. To comply with the relevant accounting framework. To better present the effect of items on financial statements. Accounting policies may have an effect on the timing and measurement of revenues, expenses, assets, liabilities, and components of equity. For example, a change in depreciation method from SLM to WDV may result in an increase or decrease in the expense. If the change is not practicable, it should be disclosed in the financial statements of the year end. Change in Accounting Estimates The preparation of financial statements involves making estimates. These estimates can be changed in the course of business due to changing circumstances. If the change in estimate is material, it shall be reflected in the P&L and quantified. Examples Useful life is estimated. Scrap value is estimated. Provision for bad debts/provisions is estimated. Extraordinary Items These are non-frequent, non-recurring items shown in the P&L as a separate line. Damages, grants shall be excluded from ordinary items. Ordinary Items These occur because we carry on business. It is principal revenue items. Includes: Discounts Penalties Required when special cases: Change in salary/wages (retrospectively required) Litigation settlement (retrospectively required)