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CFO Fundamentals: Your Quick Guide to Internal Controls, Financial Reporting, IFRS, Web 2.0, Cloud Computing, and More by ALLISON I. SHIM, JOEL G. SIEGEL, JAE K. SHIM

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CHAPTER SIX

Accounting and Disclosures

THIS CHAPTER DISCUSSES the accounting involved in changes in principle, estimate, and reporting entity. Corrections of errors are also presented. In a troubled debt situation, the debtor wants relief from the creditor. Non–interest-bearing notes and futures contracts are presented. Disclosure about financial instruments with off-balance-sheet risk is discussed.

This chapter also presents disclosures for accounting policies; development-stage company reporting and disclosures; disclosures for capital structure, related parties, inflation, and business interruption insurance; and environmental reporting and disclosures.

ACCOUNTING CHANGES

The types of accounting changes as per Accounting Standards Codification (ASC) No. 250-10-05, Accounting Changes and Error Corrections: Overall (Financial Accounting Standard [FAS] No. 154, Accounting Changes and Error Corrections—A Replacement of APB Opinion No. 20 and FASB Statement No. 3) are principle, estimate, and reporting entity.

What do we do if an accounting principle is changed?

ASC No. 250-10-05 mandates retroactive application to previous years’ financial statements of changes in accounting principle. This approach is the application of a different accounting method to previous years as if that new method had always been used. If it is impractical to ascertain either the year-specific impact or the cumulative effect of the change, the newly adopted accounting method must be applied to the beginning ...

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