Accounting Changes IFRS requires changes in accounting principles to be reported by giving retrospective application to the earliest period presented.

ASC Topic 250 states that a change in the periods benefited by a deferred cost should be treated as a change in accounting estimate. Changes in accounting estimates are accounted for in the period of change and future periods if the change affects both.

A change in reporting entity requires retrospective application to the earliest year presented if practicable.

The correction of an error is reported by restating prior year financial statements. Amounts are restated only for errors in financial statements.

A change in the method of accounting for long-term contracts requires retrospective application to the earliest year presented if practicable.

A change in the salvage value of an asset is a change in accounting estimate. ASC 250-10-45-17 states that a change in accounting estimate should be accounted for in the period of change and future periods if the change affects both. ASC Topic 250 states that changes in estimates are accounting changes.

only certain changes in accounting principle (not estimate) should be reported by restating the financial statements of all prior periods presented.

A change in accounting principle and a change in accounting entity are accounted for by retrospective application.

Financial Statements Fair Value Measurement of Non Financial Assets The asset can be valued at its highest and best use, which can be either in-use or in-exchange. The asset should be in its highest and best use to determine the fair value of the nonfinancial asset.

SG&A Operating expenses are usually divided into two categories, selling expenses and general and administrative (G&A) expenses. Selling expenses are related to the sale of a companys products, while G&A expenses are related to the companys general operations. Therefore, Toll should include the following costs in G&A expense Freight-in ($180,000) is an inventoriable cost which should be reflected in cost of goods sold and ending inventory. Freight-out, the cost of delivering goods to customers ($160,000), is included in selling expenses. Sales representatives salaries ($215,000) are also a selling expense

Kkk

Sales Cost of goods sold Current cost income from continuing operations Realized holding gain (loss) Realized income Unrealized holding gain (loss) Current cost net income

Current Cost Income Statement

xxx xxx xxx xxx xxx (xxx) xxx

Current cost income from continuing operations is sales revenue less expenses on a current basis. Realized holding gains (losses), the difference between current cost and historical costs of assets consumed, are then added (subtracted) to arrive at realized income (loss). Realized income (loss) is always the same as historical net income (loss). Finally, unrealized holding gains (increases in the current cost of assets held during the year) are included to arrive at current cost net income. Therefore, if current cost of goods sold is less than historical cost of goods sold, then current cost income from continuing operations will be increased compared to historical cost income from operations.

Comprehensive Income
Net income for year 1 Other comprehensive loss: Unrealized loss on available-for-sale securities Translation adjustments Comprehensive income for year 1 $300,000 $(42,000) $ 17,000 (25,000) $275,000

The dividends paid on the common stock do not affect the amount reported for comprehensive income. Other comprehensive income (loss) is comprised of the following components. Unrealized gains and loss on available-for-sale securities; Translation adjustments related to investments in foreign companies; Minimum pension liability adjustment; Reclassification to avoid double counting of items reported in other comprehensive income (loss) in a prior or current year that are reported in net income of the current year.

Reporting Comprehensive Income Applies enterprises that develop a full set of financial statements which report cash flows, results of operations, and financial position.

Leases -ASC Topic 840 states that rent on operating leases should be expensed on
a straight-line basis unless another method is better suited to the particular benefits and costs associated with the lease. In this lease, the lessee must pay rent of $30,000 monthly for 10 years less the first 3 months, or 117 months (120 3). Therefore, total rent expense for the 10 years is $3,510,000 (117 x $30,000). Recognizing rent expense on a straight-line basis, year 1 rent expense is $87,750 ($3,510,000 x 3/120). Termination costs When Lessee cancels lease, recognize the termination costs at fair value at the date the agreement is terminated, the entity no longer receives the rights to the assets, or the company ceases to use the asset (cease-use date).

Sales Type Lease

The lease is a sales-type lease because title to the leased asset transfers, collectibility is reasonably assured, there are no material cost uncertainties, and a manufacturers profit exists. Therefore, the lessor would recognize sales of $77,000 and cost of sales of $60,000, resulting in a profit of $17,000. There is no interest income in year 1 since the sale occurs on the last day of the year.