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Accounting Change

 
Business Dictionary: Accounting Change

Change in: (1) accounting principles (such as a new depreciation method); (2) accounting estimates (such as a revised projection of doubtful accounts receivable); or (3) the reporting entity (such as a merger of companies). When an accounting change is made, appropriate disclosure is required to explain its justification and financial effect, thereby enabling readers to make appropriate investment and credit judgments.

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Accounting Dictionary: Accounting Change
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Change in: (1) accounting principles (such as a new depreciation method); (2) accounting estimates (such as a revised projection of doubtful accounts receivable); or (3) the reporting entity (such as a merger of companies). When an accounting change is made, appropriate Footnote disclosure is required to explain its justification and financial effect, thereby enabling readers to make appropriate investment and credit judgments. Proper justification for a change in accounting principles may be the issuance of a new FASB pronouncement, SEC Accounting Series Release (ASR) or IRS regulation. Changes in estimates are justified by changing circumstances such as a greater degree of wear and tear of a fixed asset than originally anticipated. Generally, the consistent use of accounting principles and procedures is essential in appraising an entity's activities and in the projection of future results; however, changes in the reporting entity have to be retroactively reflected for comparative purposes.

 
 

 

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Business Dictionary. Dictionary of Business Terms. Copyright © 2000 by Barron's Educational Series, Inc. All rights reserved.  Read more
Accounting Dictionary. Dictionary of Accounting Terms. Copyright © 2005 by Barron's Educational Series, Inc. All rights reserved.  Read more