FAR: Accounting changes and error corrections (ASC 250)

The rules, one page each

1. Change in Estimate vs. Error Under ASC 250Side by side

   New information revises a reasonable estimate prospectively. If prior statements were not GAAP-compliant based on then-available information, correct material errors by restating comparatives and adjusting opening retained earnings for effects before the earliest period presented.

2. Compute Depreciation After a Method or Useful Life ChangeWorked example

   A depreciation-method change is a change in accounting estimate effected by a change in accounting principle and is applied prospectively. Use the change-date carrying amount, revised remaining life or output, and updated salvage; do not revise prior depreciation.

3. Prior-Period Error Correction: Retained Earnings CalculationWorked example

   Restate comparative periods for material prior-period errors and adjust opening retained earnings of the earliest period presented for effects arising before that period. Current-period income includes only current-period effects.

4. ASC 250: Retrospective Changes and the LIFO ExceptionSide by side

   Apply principle changes retrospectively when practicable: restate prior periods and adjust opening retained earnings of the earliest period presented for earlier effects. Apply the LIFO adoption prospectively when retrospective application is impracticable.