Table of Contents

Accounting Changes and Error Corrections. 1

Introduction. 1

Changes in Accounting Principle. 1

Disadvantages of Retrospective Application. 3

Changes in Accounting Estimate. 3

Disadvantages of Prospective Application. 4

Changes in Reporting Entity. 4

Correction of an Error in Previously Issued Financial Statements. 5

Corrections Related to Prior Interim Periods. 6

The Materiality of an Error. 6

The Materiality Principle. 7

The SEC’s View of Materiality. 7

Accounting Changes and Error Corrections Disclosures. 10

Change in Accounting Principle. 10

Change in Accounting Estimate. 11

Change in Reporting Entity. 11

Error Corrections. 11

Prior Period Adjustments. 12

Historical Summaries. 12

Summary. 14

Review Questions. 15

Answers to Course Questions. 16

Glossary. 18

Index. 19

Final Examination…………………………………………………………………………………………………...21