1. 1 accounting changes that’s me

2. 2 three issues

3. 3 change in accounting principles change in accounting estimates prior period adjustments

4. 4 change in accounting principles retrospective method - voluntary if specified by ASU prospective method - to LIFO cumulative effect method- change in accounting estimates prospective method prior period adjustments retrospective method

5. 5

6. 6 three methods of reporting

7. 7 I’m going to teach the three reporting methods

8. 8

9. 9 cumulative effect (current year) change in accounting principles – if allowed prospective change in accounting principles - to LIFO changes in accounting estimates retrospective change in accounting principles - if specified by ASU correction of prior period errors or prior period adjustments

10. 10

11. 11 “ave cost” financial statements

12. 12

13. 13 FIFO financial statements

14. 14

15. 15 LIFO financial statements

16. 16

17. 17 don’t even think about it

18. 18 cumulative effect change in accounting principle if it were permitted by ASC in our example - from average cost to FIFO

19. 19 these are the financial statements that we mailed out last year using.... average cost

20. 20

21. 21 we can calculate what inventory would have been on 12/31/12 as if we had been using FIFO since 1/01/11

22. 22 fold here

23. 23 these are the financial statements that we will mail out this year after the change in accounting principle from “ave cost” to FIFO

24. 24

25. 25 required entry it is 1/01/13 (actually anytime during 2013) 2013 G.L. is still open 2012 G.L. is closed Inventory6.92 Cumulative effect...6.92

26. 26 work has to be better than this

27. 27 prospective change in accounting principle in our example from ave cost to LIFO too difficult to calculate the cumulative effect, you would have to go back to day 1 changes in accounting estimates change estimated life of depreciable asset change estimates in bad debt expense

28. 28 these are the financial statements that we mailed out last year using... average cost

29. 29

30. 30 in order to calculate what inventory would have been on 12/31/12 if we had been using LIFO since 1/01/11we would have to back to 1/01/11

31. 31 fold here

32. 32 these are the financial statements that we will mail out this year after the change in accounting principle from “ave cost” to LIFO

33. 33

34. 34 no entry required you take the balances in the G.L. on 12/31/12 and use those for your beginning balances in 2013

35. 35 retrospective change in accounting principle specified for certain accounting changes for example a change from LIFO to ??? correction of prior period errors prior period adjustments calculate the cumulative effect as of 1/1/xx of the first year presented in the financial statements

36. 36 LIFO financial statements

37. 37

38. 38 these are the financial statements that we mailed out last year using... LIFO

39. 39

40. 40 we can calculate what inventory would have been on 12/31/11 and 12/31/12 if we had been using FIFO since 1/01/11

41. 41

42. 42 these are the financial statements that we will mail out this year after the change in accounting principle from LIFO to FIFO

43. 43

44. 44 required entry it is 1/01/13 (actually anytime during 2013) 2013 G.L. is still open 2012 G.L. is closed Inventory23.50 Retained Earnings 23.50 we can’t adjust 2012’s G.L. it is closed so we have to make our AJE in 2013’s G.L.

45. 45 correction of a prior period error are you up the creek without

46. 46 single year financial statements these are the financial statements that we mailed out last year using LIFO but we made a mistake in our physical inventory... we only counted 8 units and we all know they really had 10

47. 47

48. 48

49. 49 these are the financial statements that we will mail out this year showing the correction with a Prior Period Adjustment

50. 50

51. 51 required entry it is 1/01/12 (actually sometime in 2012) 2012 G.L. is still open 2011 G.L. is closed Inventory9.00 Retained Earnings 9.00

52. 52 two-year comparative financial statements these are the financial statements that we mailed out last year using LIFO we made a mistake in our physical inventory... we only counted 8 units and we all know they really had 10

53. 53

54. 54

55. 55 these are the financial statements that we will mail out this year showing the correction

56. 56

57. 57 required entry it is 1/01/13 (actually sometime in 2013) 2013 G.L. is still open 2012 G.L. is closed Inventory.00 Retained Earnings.00 we can’t adjust 2012’s G.L. it is closed so we have to make our AJE in 2013’s G.L. as of 12/31/2012 Inventory is OK

58. 58 no bull TAD