Wiley GAAP 2008

Definitions of Terms

In the context of FAS 154, an accounting change is one of three types of modifications that affect a reporting entity's accounting principles and practices, or its application of them. The three types of accounting changes are: (1) a change in accounting principle from one generally accepted accounting principle to another alternative that is considered preferable, (2) a change in an accounting estimate, and (3) a change in the reporting entity. Although, technically, corrections of errors in prior periods' financial statements (referred to as “restatements”), are not accounting changes, their treatment is also governed by FAS 154.

The accounting principles of a reporting entity and the methods of applying them. Management is required to adopt the accounting policies that result in a fair, full, and complete presentation of financial position, results of operations, and cash flows in the financial statements of the reporting entity.

A methodology used to measure and report the monetary effects of economic events in financial statements. Acceptable accounting principles are either prescribed by a recognized standard‐setting body in an authoritative pronouncement or, in the absence of a relevant pronouncement, are predominantly followed by entities that engage in transactions of a similar nature or operate in a particular industry or profession. In the context of FAS 154, accounting principles encompass both accounting practices and the methods of applying them. ...