Accounting Change
Definition of 'Accounting Change'A change in accounting principles, accounting estimates, or the reporting entity. A change in an accounting principle is a change in a method used, such as using a different depreciation method or switching from LIFO to FIFO. An example of an accounting estimate change could be the recalculation of machine's estimated life due to wear and tear. The reporting entity could change due to a merger or a break up of a company.Accounting changes require full disclosure in the footnotes of the financial statements to describe the justification and financial effects of the change. This allows readers of the statements to analyze the changes appropriately. |
|
Investopedia explains 'Accounting Change'A company generally needs to restate past statements to reflect a change in accounting principle. A change in accounting estimate does not need to be restated. In the case of any accounting change, users of the financial statements should examine the footnotes closely to understand what the changes mean and if they effect the true value of the company. |
Related Definitions
Articles Of Interest
-
Financial Footnotes: Start Reading The Fine Print
Find out what could be hidden in this often-overlooked part of the financial statements. -
Accounting Rules Could Roil The Markets
FAS 142 is an accounting rule that changes the way companies treat goodwill. Be aware of the impact it has on reported earnings to avoid making bad investment decisions. -
Footnotes: Early Warning Signs For Investors
These documents hold very important information, but reading them takes skill. -
Accounting and Valuing Employee Stock Options
Learn the different accounting and valuation treatments of ESOs, and discover the best ways to incorporate these techniques into your analysis of stock. -
Depreciation: Straight-Line Vs. Double-Declining Methods
Appreciate the different methods used to describe how book value is "used up". -
Financial Statement: Extraordinary Vs. Nonrecurring Items
When it comes to analyzing a company, successful analysts spend considerable time differentiating between accounting items that are likely to recur going forward from those that most likely will ... -
Get A Career In Showbiz Accounting
An accounting career doesn't have to be boring. If you love numbers, but want excitement as well, consider the field of showbiz accounting. -
What Management Accountants Do
If you like keeping track of a company's income and expenses but also want to hold a position with significant responsibility and authority, management accounting could be the job for you. -
GAAP And The IFRS Standards Convergence Efforts In 3 Substantial Areas
Understand the specific steps that have been taken in hopes of converging the GAAP and the IFRS accounting standards, despite the philosophically and culturally based methodological differences ... -
Using The Price-To-Book Ratio To Evaluate Companies
The P/B ratio can be an easy way to determine a company's value, but it isn't magic!
Free Annual Reports