Posted: July 19th, 2016

Explain briefly the difference between those two methods of applying an accounting change?

Hello, Can you provide direction with the below questions:

Lesson 7 has to do with pending changes. The effects of implementing a change are usually dealt with retrospectively or prospectively.

1) Explain briefly the difference between those two methods of applying an accounting change.

First give a definition of the two types of applications and then answering this question: If I were going to switch depreciation methods from straight line to double declining balance, explain, in general terms, how I would handle this (apply the effect of the change) if I did it retrospectively versus prospectively.

2) After you have given the definitions and then described how a change from SL to DDB would be handled retrospectively and then how such a change would be handled prospectively, then for this particular change (SL to DDB depreciation) what does GAAP require, i.e., what is the proper way to handle a change from SL to DDB – retrospectively or prospectively?