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What is Accounting Change

>> February 26, 2012

Meaning of Accounting Change 

Accounting change is change in accounting rules, regulation, estimation and change in accounting reporting.

Explanation of Accounting Changes 

1. Changes in Accounting Rules and Regulations

Every country's expert accounting organisation makes some accounting rules and regulations in the form of general accepted accounting principles. Time to time, this organisation changes these rules and regulation. For example, India's GAAP have been converted into IFRS. If we compare both Indian GAAP and IFRS, we can find lots of differences between these rules.

2. Changes in Accounting Estimations 

Accounting estimations means to estimate the revenue and financial position on the basis of some accounting methods. Changes in these accounting methods is the change in the accounting estimations. For example, company is using FIFO method for valuation of closing stock. This valuation method directly affects our future  revenue and financial position estimation. If we change it and start to use LIFO method, it will bring new figures of revenue and financial position. Like there is also possibility of changing of depreciation method and creating of deferred tax provision.

3. Changes in Accounting Reporting 

When any company or expert accounting organisation changes the accounting rules and estimations, it is the duty to show all these changes in the news paper or media on the footnote of each new financial statement. After this, accounting reporting will be different from past reporting but it will be more useful for investors and other interested parties.

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