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DOCUMENT SCORE

AMcCAaley_Course Project Week 4_102516

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Vocabulary enhancement 16 Word Choice 16

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Author Note

This paper is on October 30,being submitted 2 1

is usually seen 3 are

rarely instituted 4

AMcCAaley_Course Project Week 4_102516 CMC CHANGE IN ACCOUNTING 3

Running Head: CMC CHANGE IN ACCOUNTING 1

Memorandum Accounting Changes and Errors

Amanda McCauley

Rasmussen College

2016, for Robert

Larison's ACG4619 Section 02 Corporate and International

Accounting course.

MEMORANDUM

TO: Connor and Martin, CMC

FROM: Amada, Financial Advisor

DATE: 30th, October 2016

SUBJECT: ACCOUNTING CHANGES AND ERRORS

CMC change in accounting

Accounting as a static practice where changes

. When changes occur, it is usually a big deal

(Johnson, 2016). Considering the contemplated expansion and the

desire to go public by CMC, accounting changes are mandatory.

Proper reporting for accounting in the move from straight-line method

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categories 5 be properly

documented 6, 7

This involves 8 principle 9 shift 10

This means 11 comparative 12

Changes in accounting estimates are more

accurate.13 report 14

expansion 15

date 16

to an accelerated model in instrumental to the expansion that CMC

intends to undertake. When considering accounting changes, there

are several categories. These need to

for accounting purposes.

Accounting principles

a shift from one recognized accounting to a

different one as seen in CMC's case. Companies that or

change their accounting principles in various organizational

subsectors must report any financial impacts realized.

the company must restart its financial statements after

the adoption.

Accounting estimates

Changes in accounting estimates are usually necessary for

accounting for items like bad loans/debts, or the period required for

servicing machinery.

The resulting financial impact is not necessarily

mandatory to report. Rather, organizations should just

variations in the current accounting time.

Reporting entity

The reporting entity to the way in which CMC will report financial data

during the modification and expansion. In a group of companies

setting, individual companies may have reported its financial date

independently. Changes to may require a more

consolidated reporting approach.

Accounting and reporting guidelines for a change in accounting

principle

According To the Fair Accounting Standards Board (FASB) and the

International Accounting Standards Board (IASB), any changes in

accounting principle require certain stipulated guidelines.

Organizations that intend to change accounting principles must;

include and incorporate the cumulative impacts resulting from the

change, consider entering an offsetting amount at the start of

presenting financial date, and duly adjust any presented financial

reports to reflect changes brought about by the newly acquired

accounting principle.

Conditions that justify change in depreciation method

By accounting standard number 6 ruled by ICAI, a chosen

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depreciation 17 When a adopts a new as required by law.company 19 method 20 18 When accounting standards demand a change of

depreciation method by a company.

present 22

21

is necessitated 23

depreciation 24

expenses 25 are completely replaced 26

be realized 27

be recalculated 28 method 29

be adjusted 30

This is 31

Difference between IFRS and GAAP in regards to 32

depreciation method should be adhered to consistently. However,

changes in depreciation methods can occur as seen in the case of

CMC. The conditions in which a company may opt to change their

method include;

When the change by the need for better

presentation of statements relating to financial nature (Fundamentals

of accounting for CA-CPT, 2016)

Impact on balance sheet and income statement after change in

depreciation

When companies like CMC opt to change their

methods from a straight line to an accelerated method, impacts on the

income statement and balance sheet must be realized. A change in

depreciation method will automatically result in increased past

expenses and decreased realized income. The net returns from

operations that are ongoing will decline. Future depreciation

will be lower for some time but will late increase in

coming years when old assets . In short, the

ROE and ROA will be lower despite the fact that equity and assets will

be less. The bigger impact will from a huge decrease in

net returns.

When the mode or method of deterring depreciation is altered or

changed, depreciations must on the new

from the date that the assets come into use. Any deficiencies or

financial surplus arising after that must in entries.

Possibilities of switching back

If CMC finally justifies the change in their accounting methods and

goes public, they are bound by standards to follow the preferred

method of accounting. Going public and registering with the SEC is a

huge move for any company. The chances of CMC going back to their

previous method are rather limited. due to the cost already

incurred in changing the method of accounting and the massive

investments that will follow in going back. Change in accounting

method calls for careful deliberations.

accounting

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a

principle 33

changes

One huge difference is that IFRS is more of principle oriented while

GAAP is majorly considered rule-based (PWC, 2016). Bearing

based orientation means that IFRS provides room for

different organization based interpretation in similar circumstances

and transactions. IFRS is, therefore, more flexible in its framework and

has the capacity for extensive disclosure of financial statements.

GAAP being rule based is more stringent in its operations. The two

bodies also differ in methodologies used in assessing accounting

treatments. GAAP is more of research based and focuses so much on

literature while IFRS on the other hand reviews existing patterns and

facts.

References

Change in Method of Depreciation - Change in Method of

Depreciation - Pearson - Fundamentals of Accounting for CA-CPT.

(2016). GradeStack Courses. Retrieved 30 October 2016, from

http://gradestack.com/Fundamentals-of/Change-in-Method-

of/Change-in-Method-of/22480-4463-54978-study-wtw

Johnson, J. (2016). Types of Changes in Accounting.

Smallbusiness.chron.com. Retrieved 30 October 2016, from

http://smallbusiness.chron.com/types-changes-accounting-24752.html

PWC, (2016). Retrieved 30 October 2016, from

http://www.pwc.com/us/en/cfodirect/assets/pdf/accounting-guides/pwc-

ifrs-us-gaap-similarities-and-differences-2015.pdf

33 Repetitive word: principle