You are a senior accountant at ABC LTD. While proof-reading financial statements for the year ended...
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You are a senior accountant at ABC LTD. While proof-reading financial statements for the year ended 30 June 2017, Luiza, a trainee accountant, has identified certain changes from last year's financial statements but she is unsure whether they represent a change in accounting policy, a revision in accounting estimate or a correction of prior-period error. Identify whether the following constitute a change in accounting policy, a revision in accounting estimate or a correction of prior-period error. a) Previously, ABC LTD accounted for its non-current assets using the historical cost basis. In the current period, however, ABC LTD has adopted the revaluation model of IAS 16 to account for its non-current assets. AP b) ABC LTD previously had a policy of calculating depreciation on equipment using the straight line method @10%. However, In light of significant losses recognized on recent disposals the management has decided to depreciate equipment by using the reducing balance method @ 20% which shall more accurately reflect the wear and tear of equipment. Ar c) АВС Luiza noticed the value of inventory brought forward in the current period (i.e. last year's closing inventory balance) has been changed because it had erroneously been valued using the LIF0 method last year. E. d) ABC LTD has a past practice of recognizing sales revenue at the time of dispatch of goods to the retailers. In the current period, however, sales revenue has not been recognized by ABC LTD until the goods Management believes the new recognition rule more accurately reflects the economic substance of the sales and returns arrangement with retailers. AP e) in estimating the employee benetits obligations of ABC LID at the previous year end, the actuary failed to take into account ABC LTD's plan to discontinue operations in one of its geographic segments. Management Recently, the actuary furnished revised estimates of ABC PLC's liability with respect to employee benefits of the current and prior periods taking into account the plans for discontinuation. Financial statements of this year have been amended accordingly. Eorir LTD has policy of valuing inventory using the FIFO method. sold to retailers have been re-sold to the end-consumers. had announced its plan three years ago. You are a senior accountant at ABC LTD. While proof-reading financial statements for the year ended 30 June 2017, Luiza, a trainee accountant, has identified certain changes from last year's financial statements but she is unsure whether they represent a change in accounting policy, a revision in accounting estimate or a correction of prior-period error. Identify whether the following constitute a change in accounting policy, a revision in accounting estimate or a correction of prior-period error. a) Previously, ABC LTD accounted for its non-current assets using the historical cost basis. In the current period, however, ABC LTD has adopted the revaluation model of IAS 16 to account for its non-current assets. AP b) ABC LTD previously had a policy of calculating depreciation on equipment using the straight line method @10%. However, In light of significant losses recognized on recent disposals the management has decided to depreciate equipment by using the reducing balance method @ 20% which shall more accurately reflect the wear and tear of equipment. Ar c) АВС Luiza noticed the value of inventory brought forward in the current period (i.e. last year's closing inventory balance) has been changed because it had erroneously been valued using the LIF0 method last year. E. d) ABC LTD has a past practice of recognizing sales revenue at the time of dispatch of goods to the retailers. In the current period, however, sales revenue has not been recognized by ABC LTD until the goods Management believes the new recognition rule more accurately reflects the economic substance of the sales and returns arrangement with retailers. AP e) in estimating the employee benetits obligations of ABC LID at the previous year end, the actuary failed to take into account ABC LTD's plan to discontinue operations in one of its geographic segments. Management Recently, the actuary furnished revised estimates of ABC PLC's liability with respect to employee benefits of the current and prior periods taking into account the plans for discontinuation. Financial statements of this year have been amended accordingly. Eorir LTD has policy of valuing inventory using the FIFO method. sold to retailers have been re-sold to the end-consumers. had announced its plan three years ago.
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a Changing the method of Valuation of assets applies to change in accounting policy ... View the full answer
Related Book For
Fundamentals of corporate finance
ISBN: 978-0470876442
2nd Edition
Authors: Robert Parrino, David S. Kidwell, Thomas W. Bates
Posted Date:
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