Accounting Changes and Error Corrections
True / False Questions 1.
Most, but not all, changes in accounting principle are reported using the retrospective approach. True False 2.
Prior years' financial statements are restated when the prospective approach is used. True False 3.
The after-tax cumulative effect on income is no longer required for changes in accounting principles. True False 4.
Most changes in accounting principle require a disclosure justifying the change in the first set of financial statements after the change is made. True False 5.
All changes reported using the retrospective approach require prior period adjustments. True False 6.
All changes in estimate are accounted for retrospectively. True False 7.
A change to the LIFO method of valuing inventory usually requires use of the retrospective method. True False 8.
Both changes in reporting entities and material error corrections are reported prospectively. True False 9.
A change in reporting entity requires note disclosure in all subsequent financial statements prepared for the new entity. True False 10.
Error corrections require restatement of all the affected prior year financial statements reported in comparative financial statements. True False
Multiple Choice Questions 11.
How many acceptable approaches are there for changes in accounting principles?
Which of the following is not one of the approaches for reporting accounting changes?
The change approach.
The retrospective approach.
The prospective approach.
All three of the above are approaches for reporting accounting changes.
An accounting change that is reported by the prospective approach is reflected in the financial statements of:
Prior years only.