shilpjain
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| Posted: 14 Jul 2009 at 11:13 | IP Logged
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At dec 31 1998 , Offline changed its method of accounting of demo costs from writing off costs over 2 years to expensing the costs immediately . Off line had deferred demo costs of $500,000 at dec 31 1997 , $300,000of which were to be written off in 1998 and remainder in 1999 . Off line's inc tax rate is 30%. In its 1998 f/s what should offline report as cumulative effect of change in accounting principle .
The answer is 0 . with the foregoing explanation
When a change in accounting principle is considered inseparable from a change in estimate, the change is handled as a change in estimate - prospectively. No cumulative effect adjustment is made.
My question how do i come to know that this is a principal change which is inseperable from an estimate change ? i solved it thinking that this is just a change in accounting principle ?
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Topic: query from chapter 1
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