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Accounting changes and error corrections

FAR Chapter 19 · Area III · Blueprint III.A

Area III, select transactions, is 25 to 35% of FAR. It starts with a question that underlies every comparison between years: when something about the accounting changes, do you go back and redo the past, or only change the future? The Blueprint asks you to calculate the effect of a change in principle, a change in estimate and an error correction, and to work out the effect on the statements and notes. Three labels, three treatments. Getting the label right is most of the work.

In this chapter

1. Three labels, three treatments
2. Change in accounting principle
3. Change in accounting estimate
4. Correction of an error: restatement
5. Errors that correct themselves and errors that do not
6. Change in reporting entity and the summary table
7. Working out the effect on the statements and notes

This chapter has 7 lessons, 50 practice MCQs with explanations and 21 simulations, plus flashcards and a recall sheet.

What this chapter covers

• Change in principle, change in estimate and error correction
• retrospective or prospective
• effect on statements and notes

Chapter 18: Equity · Chapter 20: Contingencies and commitments