Question

Select all that apply for u.s. gaap, which of the following are considered accounting changes?

a. change in accounting principle
b. change in reporting period
c. change in reporting entity
d. change in accounting estimate

Answer 1

Under U.S. GAAP, the accounting changes that are considered are change in accounting principle, change in reporting period, and change in reporting entity.

Step-by-step explanation:

The three accounting changes that are considered under U.S. GAAP (Generally Accepted Accounting Principles) are:

• Change in accounting principle: This occurs when a company switches from one acceptable accounting method to another. For example, a company may change from the LIFO (Last-In, First-Out) method to the FIFO (First-In, First-Out) method for inventory valuation.
• Change in reporting period: This refers to a change in the timeframe for which financial statements are prepared. For instance, a company may switch from a calendar year-end reporting period to a fiscal year-end reporting period.
• Change in reporting entity: This occurs when there is a change in the business entity that is issuing the financial statements. For example, if a company is acquired by another company and becomes a subsidiary, there would be a change in reporting entity.

It's important to note that a change in accounting estimate is not considered an accounting change under U.S. GAAP. A change in accounting estimate refers to a revision in an estimate used in the preparation of financial statements, such as the useful life of an asset or the allowance for doubtful accounts.