Section 3: 25–35%3A
Accounting Changes and Error Corrections
Exam insight
Accounting changes under ASC 250 show up on nearly every FAR exam, usually 2-3 MCQs. The core skill is spotting which treatment applies: retrospective, prospective, or a prior period adjustment. The one that trips people is a change in depreciation method. It looks like a principle change, but ASC 250 treats it as a change in estimate effected by a change in principle, so it's prospective only, with no restatement. Lock that distinction in. And remember, error corrections always go to retained earnings (net of tax), never through current income.
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
Patterns in this topic
The exam re-skins the same archetypes. Recognize these here, then drill them in the Pattern Lab.
Exam tip
Study smarter: before you expand each card, cover the screen and try to recall what the concept means from its title alone. Retrieving it from memory builds the recall the exam actually tests, and it beats re-reading.