Newly issued ASUs include specific transition and disclosure guidance for the period of adoption. Voluntarily changes from one acceptable accounting principle to another on the basis that it is preferable. Mandatory changes required by a newly issued Accounting Standard Update (ASU) or A change in the method of applying an accounting principle also is considered a change in accounting principle.”Ī change in accounting principle is applied for two types of changes: “A change from one generally accepted accounting principle to another generally accepted accounting principle when (a) there are two or more generally accepted accounting principles that apply or (b) the accounting principle formerly used is no longer generally accepted. In order to understand the accounting and disclosure obligations for each of these categories, it is helpful to begin with a basic understanding of their meaning:Ī change in accounting principle is defined as: “Accounting changes” are those in the first three categories above. While the guidance included herein is not a substitute for the exercise of professional judgment or professional accounting advice, we hope that you find it a useful starting point when assessing the financial reporting ramifications of accounting changes and errors in previously issued financial statements.Īccounting Standards Codification (ASC) Topic 250, Accounting Changes and Error Corrections, addresses certain circumstances that require special accounting or disclosure, including:Ĭorrection of an Error in Previously Issued Financial Statements. In this publication, we provide an overview of the types of accounting changes that affect financial statements, as well as the disclosure and reporting considerations for error corrections. Accounting changes and errors in previously filed financial statements can affect the comparability of financial statements. A fundamental pillar of high quality public financial reporting is reliable, comparable financial statements that are free from material misstatement. The financial markets depend on high quality financial reporting.
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