[Anonymous]

Becker Question –

Quo manufactures heavy equipment to customer specifications on a contract basis. On the basis that it is preferable, accounting for these long-term contracts was switched from the completed-contract method to the percentage-of-completion method:

A. Change in accounting principal

B. Change in accounting estimate

C. Correction of an error in previously presented f/s

D. None of the above.

Answer: A

Next question is same, but asks whether it’s

A. Cumulative effect approach,

B. Retroactive or retrospective restmt approach,

C. Prospective approach.

Answer B.

I thought the answer would be B, change in accounting estimate. Isn’t this one of those changes in accounting principle that are inseparable from a change in estimate? Change to LIFO or change in depreciation method are change in principle, but are treated as change in accounting estimate, and are classified as prospectively.

Also, aren’t retrospectively approach require cumulative effect…as in beg. RE is changed.

Help??

Thanks:!)

[Anonymous]

@CPA628…like u said, changed to LIFO (or from?) and depreciation are treated as change in estimate…the question doesn't deal with either of these two aforementioned situations. completion and percentage are both acceptable accounting methods (principal) to evaluate and recognize earned revenues. therefore, it's a change in accounting principal.

[Anonymous]

Here's what Becker says, “Changed in accounting principle that are inseparable from a change in estimate (e.g. a change from the installment method to immediate recognition method b/c uncollected accounts can now be estimated).

So I'm guessing besides the exception, everything else is considered change in principle. So techincal…ugh. Thank you:!)

[Anonymous]

Just a little homework to help with the idea of changing methods on long term construction projects. If you change from one accounting method to another, it's my understanding that you must file FORM 3115-Application for Change in Accounting Method (google to find it). (However, I'm dealing with an EA right now who insists that he doesn't have to file the form to change the accounting method for a company I'm the accountant for, and he's the tax guy for.)

[Author]

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