Berkeley Company, a manufacturer of many different products, changed its inventory method from FIFO to LIFO. The
Question:
Berkeley Company, a manufacturer of many different products, changed its inventory method from FIFO to LIFO. The LIFO method was determined to be preferable. In addition, Berkeley changed the residual values used in computing depreciation for its office equipment. It made this change on January 1, 2007 because it obtained additional information.
On December 31, 2007, Berkeley changed the specific subsidiaries comprising the group of companies for which consolidated financial statements are presented.
Required
1. What kind of accounting change is each of the preceding three situations? For each situation, indicate whether or not the company should show:
a. The retrospective application of a new accounting principle.
b. The effects on the financial statements of the current and future periods.
c. Restatement of the financial statements of all prior periods.
2. Why does the company have to disclose a change in accounting principle?
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
Step by Step Answer:
Intermediate Accounting
ISBN: 978-0324300987
10th Edition
Authors: Loren A Nikolai, D. Bazley and Jefferson P. Jones