CMC has been reviewing its operating policies. Connor and Martin are contemplating a change in the accounting for its equipment from the straight-line method to an accelerated method. However, they wonder how the company will report this accounting change and how it will affect their financial statements. For their third request, they would like you to research the following topics:
What are the categories of accounting changes?
What are the accounting and reporting guidelines for a change in accounting principle related to depreciation methods?
What are the conditions that justify a change in depreciation method, as considered by CMC?
If they proceed with the change in depreciation methods, how will it affect their balance sheet and income statement (in general)?
Assume they do go public and are registered with the SEC. If CMC justifies a change in accounting method as preferable under the circumstances, and the circumstances change, can they switch back to the prior method of accounting before the change? Why or why not?
How do IFRS differ from GAAP regarding accounting changes? Are there any major issues?
Memorandum Mechanics should be as follows:
The body of the memorandum should be a professional presentation centered on clear and concise writing. The responses to the questions should be detailed, well researched, and specifically related to CMC's industry.
The memorandum itself does not have to be in APA format. However, you should have in-text citations and a reference page. Both of these items should be in APA format.
Use the FASB Codification and IFRS to address all technical accounting issues presented in the questions, being certain to reference the applicable sections of the Codification and IFRS in your report. You may quote directly from the Codification and IFRS as long as all direct quotes are included in quotation marks.
Any other sources used to support your responses should similarly be properly documented. You should have other credible sources in addition to the Codification and IFRS. The following might be useful for research: Rasmussen College online library services School of Business - Accounting.
For more information on APA, please review the Online Guide under the Resources tab.