Accounting Changes
A change in accounting principle results from adoption of a generally accepted accounting principle different from the one previously used for reporting purposes. The term accounting principle includes not only accounting principles and practices, but also the methods of applying them. Changes in accounting principles (or the method of applying them) must be justified by those who make the change (the entity's management), unless they are made in order to comply with a FASB position. (See Chapter 5 for a detailed discussion of accounting changes.)
Example of disclosure for a change in accounting principle
2008 | 2007 | |
Sales | $xxx | $xxx |
(Details omitted) | ________ | ________ |
Income before cumulative effect of a change in accounting principle | $xxx | $xxx |
Cumulative effect on prior years (to 12/31/06) of changing to (change described) (net of $_tax) | xxx | ________ |
Net income | $xxx | $xxx |
Per share amounts (simple capital structure) | ||
Income before cumulative effect of a change in accounting principle | $xxx | $xxx |
Cumulative effect on prior years (to12/31/06) of changing to (change described) | xxx | ________ |
Earnings per common share | $xxx | $xxx |
Pro forma1 amounts assuming the new (change principle) is applied retroactively: | ||
Net income | $xxx | $xxx |
Earnings per share | $xxx | $xxx |
[1] The pro forma amount above is not to be confused with the pro forma income numbers that the SEC has expressed concern about, and which is addressed, inter ...
Get Wiley GAAP 2008 now with the O’Reilly learning platform.
O’Reilly members experience books, live events, courses curated by job role, and more from O’Reilly and nearly 200 top publishers.