[Anonymous]

I know this was revised last year – that if some company makes a switch from cost to equity, or equity to cost, they only have to apply it prospectively, *not* retrospectively. I remember when I was in school like 5-6 years ago and we were learning about this, the rule still was that “a change in accounting principle requires retrospective treatment” aka “re-do financial statements to reflect the change.” So now that does not have to be done? If so, that’s very convenient – although potentially misleading for anyone who might look at the financials if the change was significant.

I know there was also an update to inventory treatments. LCM (lower of cost or market) now only applies to LIFO or retail, *not* FIFO or weighted average/specific identification/other, in which case lower of cost or NRV is used (LCNRV is the used for IFRS too).
The retail method of determining ending inventory – I don’t know how often that’s used??
It involves using a ratio of cost to retail I think? I’ll have to look it up. BUT, my question is, if there’s a change in inventory method used, the financials do have to be re-stated, correct?

[Anonymous]

Bumpity

[Anonymous]

A change in inventory method is CHANGE IN ACCOUNTING ESTIMATE (CIAE).
A change in estimate is handled prospectively. No cumulative effect adjustment is made and no separate line item presentation is made on any financial statement. If a material change is being made, appropriate footnote disclosure is necessary

A change in accounting estimate that affects the following should be disclosed in the NTFS
1. Several future periods
2. IFCO (Income From Continuing Operations)
3. NI
4. Related per share information for the current year

The following instances when CIAE need not disclose:
3 ‘’NOT’’
N – Nonrecurring transactions
O – Ordinary accounting estimates, unless material
T – Terminated transactions

Changes in estimates affect only the current and subsequent periods (not prior periods and not RE).

[Anonymous]

No. Prospective. If you had to change it retrospectively, you'd be there for a long time. 🙂

[Anonymous]

I guess there were many people who were there for a long time, because it used to be retrospective.

[Author]

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