Conditions for a Change in Accounting Policy Under IFRS and ASPE

Essay

Conditions for a change in accounting policy under IFRS and ASPE
What conditions are allowed for a change in accounting policy to be acceptable?
1. The change is required by a primary source of GAAP.
2. A voluntary change results in the information in the financial statements being as reliable and more relevant.
However, some voluntary changes are allowed under ASPE without having to meet the "reliable and more relevant" criterion. These include accounting and reporting:
(a) for investments in subsidiary companies, and in companies where the investor has significant influence or joint control;
(b) for expenditures during the development phase on internally generated intangible assets;
(c) for defined benefit plans;
(d) for accounting for income taxes; and
(e) for measuring the equity component of a compound financial instrument
Matching accounting changes to situations
The three types of accounting changes are:
Code
a) Change in accounting policy
b) Change in accounting estimate
c) Error correction
Instructions
Following are a series of situations. You are to enter a code letter to the left to indicate the type of change.
1. Change due to debiting a new asset to an expense account.
2. Change from FIFO to weighted average costing.
3. Change due to failure to recognize unearned portion of revenue.
4. Change in amortization period for an intangible asset.
5 Change in the calculation of warranty liabilities.
6. Change due to failure to recognize and accrue income.
7. Change in residual value of a depreciable plant asset.
8. Change from an unacceptable accounting policy to an acceptable accounting policy.
9. Adoption of a new accounting standard.
10. Change due to expensing prepaid assets.
11. Change from straight-line to double declining-balance method of depreciation.
12. Change in estimated service life of a depreciable plant asset.
13. Change from one acceptable policy to another acceptable policy.
14. Change due to understatement of inventory.
15. Change in estimated net realizable value of accounts receivable.