Section 3: 25–35%3A
Accounting Changes and Error Corrections
ASC 250 governs how changes in accounting are reported. The treatment varies dramatically depending on the TYPE of change — and using the wrong method is a definitive mistake. This topic consistently appears on FAR because it tests conceptual understanding, not just memorization.
What AICPA Wants You to Know
- 1Distinguish the three types of accounting changes and one error correction category
- 2Apply retrospective treatment to changes in accounting principle
- 3Apply prospective treatment to changes in accounting estimate
- 4Record error corrections as prior period adjustments to retained earnings
- 5Explain the change in reporting entity and its required treatment