# ASC Topic 250: Accounting Changes and Error Corrections Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/250/) Study and research edition. Verify current requirements with the official source. Summaries, enrichment, and tags are machine-generated study aids. Paragraph html preserves source markup; snippet is abbreviated. Pending content is not necessarily effective. Tables and mathematical or amendment markup are retained as HTML where Markdown would lose structure. Source downloaded (UTC): 2026-09-09T23:16:57.725Z to 2026-09-09T23:17:57.739Z Record version: sha256:2f7eada8645001e4079f61c72c4467fbd0b8cbf2ba38d16108f559f942e1720b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## Machine-generated topic summary ASC 250 sets out how entities report accounting changes and correct errors. The Overall Subtopic (250-10) establishes the framework: a change in accounting principle is applied retrospectively and is permitted only if required by a Codification update or justified as preferable; a change in accounting estimate (including a change in depreciation, amortization, or depletion method, which is a change in estimate effected by a change in principle) is accounted for prospectively in the period of change and future periods; a change in reporting entity is applied retrospectively; and an error in previously issued statements is corrected by restatement, excluded from current net income. Retrospective application captures only direct effects (indirect effects go to the period of change) and may be scaled back only when "impracticable" under the narrow conditions of 250-10-45-9. Two industry Subtopics apply this framework: 250-978 treats a time-share redelineation driven by a significant change in facts and circumstances as a change in estimate (current-period adjustment per 978-330-35-1) but a mere rephasing as a change in the method of applying a principle, and 250-980 provides that a change in method by a regulated entity is reported like an unregulated entity's unless it affects costs allowable for rate-making, in which case it generally follows regulatory implementation. Source downloaded (UTC): 2026-09-09T23:16:57.725Z to 2026-09-09T23:17:32.360Z Record version: sha256:8a07fe6bfaef3415e53451eda5fbf4e930dafb3b4304f782169cfd0e1ea9b83d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 250-10: Accounting Changes and Error Corrections — Overall ### Machine-generated study aids ```json { "summary": "ASC 250-10 governs how entities report the three types of accounting changes (change in accounting principle, change in accounting estimate, change in reporting entity) and the correction of errors in previously issued financial statements. The default rule is retrospective application for changes in principle and changes in reporting entity, prospective treatment (current and future periods) for changes in estimate, and restatement for error corrections. A change in principle is permitted only if required by a Codification update or justified as preferable, and retrospective application may be limited only where it is \"impracticable\" under the narrow conditions in 250-10-45-9.", "key_points": [ "An entity may change an accounting principle only if the change is required by a newly issued Codification update or the entity can justify the alternative principle as preferable (250-10-45-2; 250-10-45-12); specific transition provisions in an update override the general model (250-10-45-3).", "Retrospective application requires the cumulative effect on pre-presented periods to adjust asset/liability carrying amounts at the beginning of the first period presented with an offsetting adjustment to opening retained earnings, and each prior period presented adjusted for period-specific effects (250-10-45-5).", "Retrospective application includes only direct effects (and related income tax effects); indirect effects are recognized in the period of the change (250-10-45-8).", "Impracticability exists only if, after every reasonable effort, the entity cannot apply the requirement, or retrospective application requires unsubstantiable assumptions about prior management intent or estimates that cannot be objectively separated from hindsight (250-10-45-9); if only period-specific effects are impracticable, apply cumulative effect at the earliest practicable period (250-10-45-6), and if the cumulative effect is impracticable, apply prospectively from the earliest date practicable (250-10-45-7).", "A change in accounting estimate is accounted for in the period of change and future periods affected and never by restatement or pro forma amounts (250-10-45-17); a change in depreciation, amortization, or depletion method is a change in estimate effected by a change in principle and must still be justified as preferable (250-10-45-18 through 45-19).", "A change in reporting entity is retrospectively applied to all prior periods presented, but previously capitalized interest cost under Subtopic 835-20 is not changed (250-10-45-21); errors discovered after issuance are corrected by restating prior-period financial statements (250-10-45-23) and are excluded from current net income (250-10-45-22).", "Disclosures include nature of and reason for the change plus why it is preferable, method of application, effects on income from continuing operations, net income and per-share amounts, and the cumulative effect on opening equity (250-10-50-1); restatements require disclosure that prior statements were restated, the nature of the error, line-item and per-share effects, and cumulative effect on opening retained earnings (250-10-50-7), with no repetition in subsequent periods (250-10-50-10)." ], "categories": [ "Presentation", "Disclosure", "Financial statement presentation", "Transition and effective dates" ], "audience_level": "intermediate", "student_note": "Exam questions almost always hinge on classifying the event first: principle (retrospective), estimate (prospective), reporting entity (retrospective), or error (restatement). The classic trap is a change in depreciation method — it looks like a change in principle but is accounted for prospectively as a change in estimate effected by a change in principle, while still requiring a preferability justification and the principle-change disclosures.", "related_topics": [ "270-10", "205-10", "260-10", "323-10", "805-10", "855-10" ], "key_concepts": [ "change in accounting principle", "retrospective application", "impracticability", "change in accounting estimate", "change in reporting entity", "error correction and restatement", "preferability", "direct and indirect effects" ] } ``` Source downloaded (UTC): 2026-09-09T23:16:57.725Z to 2026-09-09T23:16:57.725Z Record version: sha256:53e2b787025b2e94367cc4963b2e39585770f149f70473b864fe975096618d94 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 250-10-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/250/10/#00-status) SEC content: no ##### [250-10-00-1](https://asc.understandingaccounting.org/asc/250/10/#250-10-00-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:16:57.725Z to 2026-09-09T23:16:57.725Z Record version: sha256:0ac6f6e98670a1a9dc5e07a1ff3d133362e9c04e8cc2befc5d589804b2068acc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following table identifies the changes made to this Subtopic.
ParagraphActionAccounting Standards UpdateDate
Direct Effects of a Change in Accounting PrincipleAmendedAccounting Standards Update No. 2015-1107/22/2015
250-10-45-15AmendedAccounting Standards Update No. 2025-1112/08/2025
250-10-45-27AmendedAccounting Standards Update No. 2020-1010/29/2020
250-10-45-28AmendedAccounting Standards Update No. 2020-1010/29/2020
250-10-50-1AmendedAccounting Standards Update No. 2025-1112/08/2025
250-10-50-4AmendedAccounting Standards Update No. 2025-1112/08/2025
250-10-50-5AmendedAccounting Standards Update No. 2012-0410/01/2012
250-10-50-6 through 50-7A
AmendedAccounting Standards Update No. 2025-1112/08/2025
250-10-50-6AmendedAccounting Standards Update No. 2023-0610/09/2023
250-10-50-6AmendedAccounting Standards Update No. 2015-0101/09/2015
250-10-50-7AAddedAccounting Standards Update No. 2020-1010/29/2020
250-10-50-9AmendedAccounting Standards Update No. 2025-1112/08/2025
250-10-50-10AmendedMaintenance Update 2014-20 (PDF)09/29/2014
250-10-50-12AddedAccounting Standards Update No. 2020-1010/29/2020
Source downloaded (UTC): 2026-09-09T23:17:01.274Z to 2026-09-09T23:17:01.274Z Record version: sha256:f45fc3a9803a4120bc982aaa927214dc3ecb01529c7d20b330dbab0680f9e98a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 250-10-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/250/10/#05-overview-and-background) SEC content: no ##### [250-10-05-1](https://asc.understandingaccounting.org/asc/250/10/#250-10-05-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:01.274Z to 2026-09-09T23:17:01.274Z Record version: sha256:62fdd7b33916383324a95e1e5581178b6b03c5d346e01cf1c2d8e19e83500794 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic provides guidance on the accounting for and reporting of accounting changes and error corrections. An [accounting change](https://asc.understandingaccounting.org/glossary/a/#accounting-change "A change in an accounting principle, an accounting estimate, or the reporting entity. The correction of an error in previously issued financial statements is not an accounting change.") can be a change in an accounting principle, an accounting estimate, or the reporting entity. Guidance for each of these types of changes is presented in separate headings within each Section. Guidance for error corrections is also presented under a separate heading within each Section. #### Accounting Changes ##### [250-10-05-2](https://asc.understandingaccounting.org/asc/250/10/#250-10-05-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:01.274Z to 2026-09-09T23:17:01.274Z Record version: sha256:ebf76cd77dbe45cdfb7aaf6962dd2d9efa2bd693bc896a4fb9853cecb5a611ba Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic establishes, unless impracticable, [retrospective application](https://asc.understandingaccounting.org/glossary/r/#retrospective-application "The application of a different accounting principle to one or more previously issued financial statements, or to the statement of financial position at the beginning of the current period, as if that principle had always been used, or a change to financial statements of prior accounting periods to present the financial statements of a new reporting entity as if it had existed in those prior years.") as the required method for reporting a [change in accounting principle](https://asc.understandingaccounting.org/glossary/c/#change-in-accounting-principle "A change from one generally accepted accounting principle to another generally accepted accounting principle when there are two or more generally accepted accounting principles that apply or when the accounting principle formerly used is no longer generally accepted. A change in the method of applying an accounting principle also is considered a change in accounting principle.") in the absence of explicit transition requirements specific to a newly adopted accounting principle. ##### [250-10-05-3](https://asc.understandingaccounting.org/asc/250/10/#250-10-05-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:01.274Z to 2026-09-09T23:17:01.274Z Record version: sha256:a88154a65daa02eb6bc5766eee595b3f7d21215f4a6119707c08e1801509d1ab Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic provides guidance for determining whether retrospective application of a change in accounting principle is impracticable and for reporting a change when retrospective application is impracticable. #### Error Corrections ##### [250-10-05-4](https://asc.understandingaccounting.org/asc/250/10/#250-10-05-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:01.274Z to 2026-09-09T23:17:01.274Z Record version: sha256:cc1a37d70e52b183738a5d4a83b5bfea67cba128539cabe7ea80d2e2fe4075dd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The correction of an [error in previously issued financial statements](https://asc.understandingaccounting.org/glossary/e/#error-in-previously-issued-financial-statements "An error in recognition, measurement, presentation, or disclosure in financial statements resulting from mathematical mistakes, mistakes in the application of generally accepted accounting principles (GAAP), or oversight or misuse of facts that existed at the time the financial statements were prepared. A change from an accounting principle that is not generally accepted to one that is generally accepted is a correction of an error.") is not an accounting change. However, the reporting of an error correction involves adjustments to previously issued financial statements similar to those generally applicable to reporting an accounting change retrospectively. Therefore, the reporting of a correction of an error by restating previously issued financial statements is also addressed by this Subtopic. ##### [250-10-05-5](https://asc.understandingaccounting.org/asc/250/10/#250-10-05-5) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:01.274Z to 2026-09-09T23:17:01.274Z Record version: sha256:9593a3efad46c99441564771df821ebd5bdf5aed9bd0125cc1dad0fcfe7307ee Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic also: 1. a Specifies the method of treating error corrections in comparative statements for two or more periods 2. b Specifies the disclosures required when previously issued statements of income are restated 3. c Recommends methods of presentation of historical, statistical-type financial summaries that are affected by error corrections. Source downloaded (UTC): 2026-09-09T23:17:03.181Z to 2026-09-09T23:17:03.181Z Record version: sha256:9f8a1f4b4ee6dc2d5a1fe7d6302482b50c4ffd5a60cd92ee4d6abbdac1e7d396 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 250-10-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/250/10/#15-scope-and-scope-exceptions) SEC content: no #### Overall Guidance ##### [250-10-15-1](https://asc.understandingaccounting.org/asc/250/10/#250-10-15-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:03.181Z to 2026-09-09T23:17:03.181Z Record version: sha256:e6aa027dfbee07fa579e389eb3dabd0d0bc964b719ffd26093e85e3df9323e67 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Scope Section of the Overall Subtopic establishes the pervasive scope for the Accounting Changes and Error Corrections Topic. #### Entities ##### [250-10-15-2](https://asc.understandingaccounting.org/asc/250/10/#250-10-15-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:03.181Z to 2026-09-09T23:17:03.181Z Record version: sha256:dcabba53a34186639c6aab6fd929cb325f78e6125b1965c39cfa82d48f25100f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Subtopic applies to all entities. #### Other Considerations ##### [250-10-15-3](https://asc.understandingaccounting.org/asc/250/10/#250-10-15-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:03.181Z to 2026-09-09T23:17:03.181Z Record version: sha256:9681e6ead0c0bd9b35926d544301827723091b571dde6c05b7d8e5fdfef4a1f0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Subtopic applies to each of the following items for business entities and not-for-profit entities (NFPs): 1. a Financial statements 2. b Historical summaries of information based on primary financial statements that include an accounting period in which an [accounting change](https://asc.understandingaccounting.org/glossary/a/#accounting-change "A change in an accounting principle, an accounting estimate, or the reporting entity. The correction of an error in previously issued financial statements is not an accounting change.") or error correction is reflected. ##### [250-10-15-4](https://asc.understandingaccounting.org/asc/250/10/#250-10-15-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:03.181Z to 2026-09-09T23:17:03.181Z Record version: sha256:6e31991ba99e0bedc48ffeedb34afd012f314043eed617ebe3f689a1dfe2d8f5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Topic does not change the transition provisions of any existing guidance. Source downloaded (UTC): 2026-09-09T23:17:07.240Z to 2026-09-09T23:17:07.240Z Record version: sha256:f9314da8c6c9015557e5392cefd67f6e76b06079053dd3fff75d0f64efc8a8f7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 250-10-45: 45 Other Presentation Matters [Read section](https://asc.understandingaccounting.org/asc/250/10/#45-other-presentation-matters) SEC content: no #### Accounting Changes ##### [250-10-45-1](https://asc.understandingaccounting.org/asc/250/10/#250-10-45-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:07.240Z to 2026-09-09T23:17:07.240Z Record version: sha256:fcbf4bc1e620ff8a07042ff46a6c4d496238fc4f586a747cdd7a19f625bddc77 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A presumption exists that an accounting principle once adopted shall not be changed in accounting for events and transactions of a similar type. Consistent use of the same accounting principle from one accounting period to another enhances the utility of financial statements for users by facilitating analysis and understanding of comparative accounting data. Neither of the following is considered to be a [change in accounting principle](https://asc.understandingaccounting.org/glossary/c/#change-in-accounting-principle "A change from one generally accepted accounting principle to another generally accepted accounting principle when there are two or more generally accepted accounting principles that apply or when the accounting principle formerly used is no longer generally accepted. A change in the method of applying an accounting principle also is considered a change in accounting principle."): 1. a Initial adoption of an accounting principle in recognition of events or transactions occurring for the first time or that previously were immaterial in their effect 2. b Adoption or modification of an accounting principle necessitated by transactions or events that are clearly different in substance from those previously occurring. ##### [250-10-45-2](https://asc.understandingaccounting.org/asc/250/10/#250-10-45-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:07.240Z to 2026-09-09T23:17:07.240Z Record version: sha256:b6debf00c200291217f3f9484533cb0d39417c013d81d0b1cfa035ec62d2ad10 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A reporting entity shall change an accounting principle only if either of the following apply: 1. a The change is required by a newly issued Codification update. 2. b The entity can justify the use of an allowable alternative accounting principle on the basis that it is preferable. ##### [250-10-45-3](https://asc.understandingaccounting.org/asc/250/10/#250-10-45-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:07.240Z to 2026-09-09T23:17:07.240Z Record version: sha256:146efa5a4d58f01d72cc38a48ae7f04b925bc305ca7007d067e7e064ed75d211 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. It is expected that Codification updates normally will provide specific transition requirements. However, in the unusual instance that there are no transition requirements specific to a particular Codification update, a change in accounting principle effected to adopt the requirements of that Codification update shall be reported in accordance with paragraphs [250-10-45-5 through 45-8](https://asc.understandingaccounting.org/asc/250/10/#250-10-45-5) . Early adoption of a Codification update, when permitted, shall be effected in a manner consistent with the transition requirements of that update. ##### [250-10-45-4](https://asc.understandingaccounting.org/asc/250/10/#250-10-45-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:07.240Z to 2026-09-09T23:17:07.240Z Record version: sha256:7b00541fc9d9fde844cef6927e7407c74e8afdbea056b717450fdef9ff9097b1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This requirement is not limited to newly issued Codification updates. For example, if existing Codification guidance permits a choice between two or more alternative accounting principles, and provides requirements for changing from one to another, those requirements shall be followed. ##### [250-10-45-5](https://asc.understandingaccounting.org/asc/250/10/#250-10-45-5) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:07.240Z to 2026-09-09T23:17:07.240Z Record version: sha256:017bdce5de415ac7791fba7cccd34b1fa61b688f16c6089906d649e74f15ca24 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall report a change in accounting principle through [retrospective application](https://asc.understandingaccounting.org/glossary/r/#retrospective-application "The application of a different accounting principle to one or more previously issued financial statements, or to the statement of financial position at the beginning of the current period, as if that principle had always been used, or a change to financial statements of prior accounting periods to present the financial statements of a new reporting entity as if it had existed in those prior years.") of the new accounting principle to all prior periods, unless it is impracticable to do so. Retrospective application requires all of the following: 1. a The cumulative effect of the change to the new accounting principle on periods prior to those presented shall be reflected in the carrying amounts of assets and liabilities as of the beginning of the first period presented. 2. b An offsetting adjustment, if any, shall be made to the opening balance of retained earnings (or other appropriate components of equity or net assets in the statement of financial position) for that period. 3. c Financial statements for each individual prior period presented shall be adjusted to reflect the period-specific effects of applying the new accounting principle. ##### [250-10-45-6](https://asc.understandingaccounting.org/asc/250/10/#250-10-45-6) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:07.240Z to 2026-09-09T23:17:07.240Z Record version: sha256:cc293d00a0348e4ec11950c5f06a21e566eea9af47660b64a8383fdacfff31b4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the cumulative effect of applying a change in accounting principle to all prior periods can be determined, but it is impracticable to determine the period-specific effects of that change on all prior periods presented, the cumulative effect of the change to the new accounting principle shall be applied to the carrying amounts of assets and liabilities as of the beginning of the earliest period to which the new accounting principle can be applied. An offsetting adjustment, if any, shall be made to the opening balance of retained earnings (or other appropriate components of equity or net assets in the statement of financial position) for that period. ##### [250-10-45-7](https://asc.understandingaccounting.org/asc/250/10/#250-10-45-7) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:07.240Z to 2026-09-09T23:17:07.240Z Record version: sha256:5b49b4e7cc233a8438d3be8ee3e10d634d0478f172a38c36840c79b256517ea8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If it is impracticable to determine the cumulative effect of applying a change in accounting principle to any prior period, the new accounting principle shall be applied as if the change was made prospectively as of the earliest date practicable. See Example 1 (paragraphs [250-10-55-3 through 55-11](https://asc.understandingaccounting.org/asc/250/10/#250-10-55-3) ) for an illustration of a change from the first-in, first-out (FIFO) method of inventory valuation to the last-in, first-out (LIFO) method. That Example does not imply that such a change would be considered preferable as required by paragraph [250-10-45-12](https://asc.understandingaccounting.org/asc/250/10/#250-10-45-12). ##### [250-10-45-8](https://asc.understandingaccounting.org/asc/250/10/#250-10-45-8) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:07.240Z to 2026-09-09T23:17:07.240Z Record version: sha256:6ad25bf6cb4fdc567226f95add40ebec1a419434653b523f2563520c01c446f0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Retrospective application shall include only the [direct effects of a change in accounting principle](https://asc.understandingaccounting.org/glossary/d/#direct-effects-of-a-change-in-accounting-principle "Those recognized changes in assets or liabilities necessary to effect a change in accounting principle. An example of a direct effect is an adjustment to an inventory balance to effect a change in inventory valuation method. Related changes, such as an effect on deferred income tax assets or liabilities or an impairment adjustment resulting from applying the subsequent measurement guidance in Subtopic 330-10to the adjusted inventory balance, also are examples of direct effects of a change in accounting principle."), including any related income tax effects. Indirect effects that would have been recognized if the newly adopted accounting principle had been followed in prior periods shall not be included in the retrospective application. If indirect effects are actually incurred and recognized, they shall be reported in the period in which the [accounting change](https://asc.understandingaccounting.org/glossary/a/#accounting-change "A change in an accounting principle, an accounting estimate, or the reporting entity. The correction of an error in previously issued financial statements is not an accounting change.") is made. ##### [250-10-45-9](https://asc.understandingaccounting.org/asc/250/10/#250-10-45-9) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:07.240Z to 2026-09-09T23:17:07.240Z Record version: sha256:6eda8c9fd2abb190bd8da8aa5f299f38d3c800793bd1748206ab169bd0e34af0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. It shall be deemed impracticable to apply the effects of a change in accounting principle retrospectively only if any of the following conditions exist: 1. a After making every reasonable effort to do so, the entity is unable to apply the requirement. 2. b Retrospective application requires assumptions about management's intent in a prior period that cannot be independently substantiated. 3. c Retrospective application requires significant estimates of amounts, and it is impossible to distinguish objectively information about those estimates that both: 1. 1 Provides evidence of circumstances that existed on the date(s) at which those amounts would be recognized, measured, or disclosed under retrospective application 2. 2 Would have been available when the financial statements for that prior period were issued. ##### [250-10-45-10](https://asc.understandingaccounting.org/asc/250/10/#250-10-45-10) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:07.240Z to 2026-09-09T23:17:07.240Z Record version: sha256:9843cd8820503e457a7cb7d99b2d2808091ad115b99d5f39fd29b78d6448da83 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic requires a determination of whether information currently available to develop significant estimates would have been available when the affected transactions or events would have been recognized in the financial statements. However, it is not necessary to maintain documentation from the time that an affected transaction or event would have been recognized to determine whether information to develop the estimates would have been available at that time. ##### [250-10-45-11](https://asc.understandingaccounting.org/asc/250/10/#250-10-45-11) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:07.240Z to 2026-09-09T23:17:07.240Z Record version: sha256:a9941b4d96f0e11a2255ccfaadcf2ae772eadae55c49454a0abf05a69237b9a8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In the preparation of financial statements, once an accounting principle is adopted, it shall be used consistently in accounting for similar events and transactions. ##### [250-10-45-12](https://asc.understandingaccounting.org/asc/250/10/#250-10-45-12) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:07.240Z to 2026-09-09T23:17:07.240Z Record version: sha256:862827cc3c0ca50de385777012e7e707728c77c559c66705425dc892b1a98ee4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity may change an accounting principle only if it justifies the use of an allowable alternative accounting principle on the basis that it is preferable. However, a method of accounting that was previously adopted for a type of transaction or event that is being terminated or that was a single, nonrecurring event in the past shall not be changed. For example, the method of accounting shall not be changed for a tax or tax credit that is being discontinued. Additionally, the method of transition elected at the time of adoption of a Codification update shall not be subsequently changed. However, a change in the estimated period to be benefited by an asset, if justified by the facts, shall be recognized as a [change in accounting estimate](https://asc.understandingaccounting.org/glossary/c/#change-in-accounting-estimate "A change that has the effect of adjusting the carrying amount of an existing asset or liability or altering the subsequent accounting for existing or future assets or liabilities. A change in accounting estimate is a necessary consequence of the assessment, in conjunction with the periodic presentation of financial statements, of the present status and expected future benefits and obligations associated with assets and liabilities. Changes in accounting estimates result from new information. Examples of items for which estimates are necessary are uncollectible receivables, inventory obsolescence, service lives and salvage values of depreciable assets, and warranty obligations."). ##### [250-10-45-13](https://asc.understandingaccounting.org/asc/250/10/#250-10-45-13) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:07.240Z to 2026-09-09T23:17:07.240Z Record version: sha256:2a06e2295b94787ed765a2492d21e9cd7639983efccc2cbbb270440fea4747d9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The issuance of a Codification update that requires use of a new accounting principle, interprets an existing principle, expresses a preference for an accounting principle, or rejects a specific principle may require an entity to change an accounting principle. The issuance of such an update constitutes sufficient support for making such a change. ##### [250-10-45-14](https://asc.understandingaccounting.org/asc/250/10/#250-10-45-14) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:07.240Z to 2026-09-09T23:17:07.240Z Record version: sha256:24d6d89cddbfc7092676387023007dadda5d12ddcf97798397efdcf989917fd0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A change in accounting principle made in an interim period shall be reported by retrospective application in accordance with paragraphs [250-10-45-5 through 45-8](https://asc.understandingaccounting.org/asc/250/10/#250-10-45-5) . However, the impracticability exception in paragraph [250-10-45-9](https://asc.understandingaccounting.org/asc/250/10/#250-10-45-9) may not be applied to prechange interim periods of the fiscal year in which the change is made. When retrospective application to prechange interim periods is impracticable, the desired change may only be made as of the beginning of a subsequent fiscal year. ##### [250-10-45-15](https://asc.understandingaccounting.org/asc/250/10/#250-10-45-15) Pending content: yes Source downloaded (UTC): 2026-09-09T23:17:07.240Z to 2026-09-09T23:17:07.240Z Record version: sha256:13f590c1a2c23995e9ba4395de26fc8dd9b437d320343f97eb004b80102d9ec6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If a public entity that regularly reports interim information makes an accounting change during the fourth quarter of its fiscal year and does not report the data specified by paragraph [270-10-50-1](https://asc.understandingaccounting.org/asc/270/10/#270-10-50-1) in a separate fourth-quarter report or in its annual report, that entity shall include disclosure of the effects of the accounting change on interim-period results, as required by paragraph [250-10-50-1](https://asc.understandingaccounting.org/asc/250/10/#250-10-50-1), in a note to the annual financial statements for the fiscal year in which the change is made. Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance: [270-10-65-1](https://asc.understandingaccounting.org/asc/270/10/#270-10-65-1)If a public entity that regularly reports interim information makes an accounting change during the fourth quarter of its fiscal year and does not report the change in a separate fourth-quarter report or in its annual report, that entity shall include disclosure of the effects of the accounting change on interim-period results, as required by paragraph [250-10-50-1](https://asc.understandingaccounting.org/asc/250/10/#250-10-50-1), in a note to the annual financial statements for the fiscal year in which the change is made. ##### [250-10-45-16](https://asc.understandingaccounting.org/asc/250/10/#250-10-45-16) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:07.240Z to 2026-09-09T23:17:07.240Z Record version: sha256:20e0ea291e24b8809ea1a1e7cc77723f97aa9e8e609b4f33b80cf6c2036b28d9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. As indicated in paragraph [270-10-45-15](https://asc.understandingaccounting.org/asc/270/10/#270-10-45-15), whenever possible, entities should adopt any accounting changes during the first interim period of a fiscal year. Changes in accounting principles and practices adopted after the first interim period in a fiscal year tend to obscure operating results and complicate disclosure of interim financial information. ##### [250-10-45-17](https://asc.understandingaccounting.org/asc/250/10/#250-10-45-17) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:07.240Z to 2026-09-09T23:17:07.240Z Record version: sha256:dcb36643acb3ad7896eba57290517549bf6c5ddf274aa61490467f0a18a78ef5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A change in accounting estimate shall be accounted for in the period of change if the change affects that period only or in the period of change and future periods if the change affects both. A [change in accounting estimate](https://asc.understandingaccounting.org/glossary/c/#change-in-accounting-estimate "A change that has the effect of adjusting the carrying amount of an existing asset or liability or altering the subsequent accounting for existing or future assets or liabilities. A change in accounting estimate is a necessary consequence of the assessment, in conjunction with the periodic presentation of financial statements, of the present status and expected future benefits and obligations associated with assets and liabilities. Changes in accounting estimates result from new information. Examples of items for which estimates are necessary are uncollectible receivables, inventory obsolescence, service lives and salvage values of depreciable assets, and warranty obligations.") shall not be accounted for by restating or retrospectively adjusting amounts reported in financial statements of prior periods or by reporting pro forma amounts for prior periods. ##### [250-10-45-18](https://asc.understandingaccounting.org/asc/250/10/#250-10-45-18) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:07.240Z to 2026-09-09T23:17:07.240Z Record version: sha256:afc3abfacb5f658fc954f51ef6bf55bd84e322cbc90bf8530e2f00211a97be0f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Distinguishing between a change in an accounting principle and a change in an accounting estimate is sometimes difficult. In some cases, a change in accounting estimate is effected by a change in accounting principle. One example of this type of change is a change in method of depreciation, amortization, or depletion for long-lived, nonfinancial assets (hereinafter referred to as depreciation method). The new depreciation method is adopted in partial or complete recognition of a change in the estimated future benefits inherent in the asset, the pattern of consumption of those benefits, or the information available to the entity about those benefits. The effect of the [change in accounting principle](https://asc.understandingaccounting.org/glossary/c/#change-in-accounting-principle "A change from one generally accepted accounting principle to another generally accepted accounting principle when there are two or more generally accepted accounting principles that apply or when the accounting principle formerly used is no longer generally accepted. A change in the method of applying an accounting principle also is considered a change in accounting principle."), or the method of applying it, may be inseparable from the effect of the change in accounting estimate. Changes of that type often are related to the continuing process of obtaining additional information and revising estimates and, therefore, shall be considered changes in estimates for purposes of applying this Subtopic. ##### [250-10-45-19](https://asc.understandingaccounting.org/asc/250/10/#250-10-45-19) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:07.240Z to 2026-09-09T23:17:07.240Z Record version: sha256:565ec31651bd40c46e34a69efdd73f1f50912e37f67a095f80410916cf444dde Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Like other changes in accounting principle, a change in accounting estimate that is effected by a change in accounting principle may be made only if the new accounting principle is justifiable on the basis that it is preferable. For example, an entity that concludes that the pattern of consumption of the expected benefits of an asset has changed, and determines that a new depreciation method better reflects that pattern, may be justified in making a [change in accounting estimate effected by a change in accounting principle](https://asc.understandingaccounting.org/glossary/c/#change-in-accounting-estimate-effected-by-a-change-in-accounting-principle "A change in accounting estimate that is inseparable from the effect of a related change in accounting principle. An example of a change in estimate effected by a change in principle is a change in the method of depreciation, amortization, or depletion for long-lived, nonfinancial assets."). (See paragraph [250-10-45-12](https://asc.understandingaccounting.org/asc/250/10/#250-10-45-12).) ##### [250-10-45-20](https://asc.understandingaccounting.org/asc/250/10/#250-10-45-20) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:07.240Z to 2026-09-09T23:17:07.240Z Record version: sha256:29e1801ddf7f3a303cd5da1363b5c218e796faae8c8e300c368ceb9cb4356168 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. However, a change to the straight-line method at a specific point in the service life of an asset may be planned at the time some depreciation methods, such as the modified accelerated cost recovery system, are adopted to fully depreciate the cost over the estimated life of the asset. Consistent application of such a policy does not constitute a change in accounting principle for purposes of applying this Subtopic. ##### [250-10-45-21](https://asc.understandingaccounting.org/asc/250/10/#250-10-45-21) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:07.240Z to 2026-09-09T23:17:07.240Z Record version: sha256:a1e507f8e7aaf28f1249bbca040363dff43205de807517f29e9a92a37e23f65c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. When an accounting change results in financial statements that are, in effect, the statements of a different reporting entity, the change shall be retrospectively applied to the financial statements of all prior periods presented to show financial information for the new reporting entity for those periods. Previously issued interim financial information shall be presented on a retrospective basis. However, the amount of interest cost previously capitalized through application of Subtopic 835-20 shall not be changed when retrospectively applying the accounting change to the financial statements of prior periods. #### Correction of an Error in Previously Issued Financial Statements ##### [250-10-45-22](https://asc.understandingaccounting.org/asc/250/10/#250-10-45-22) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:07.240Z to 2026-09-09T23:17:07.240Z Record version: sha256:0fb2953371a7aa0a7beb03c9110bb61c29af323dd8cc61bf0b2660bcc34a5593 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. As indicated in paragraph [220-10-45-7A](https://asc.understandingaccounting.org/asc/220/10/#220-10-45-7A), net income for the period shall include all items of profit and loss recognized during the period, including accruals of estimated losses from loss contingencies, but shall not include corrections of errors from prior periods. As used in this Subtopic, the term _period_ refers to both annual and interim reporting periods. ##### [250-10-45-23](https://asc.understandingaccounting.org/asc/250/10/#250-10-45-23) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:07.240Z to 2026-09-09T23:17:07.240Z Record version: sha256:be2d918c0dc4830d885db1cd03e71c8d6144a82c7902d61b381ed665853935f5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Any error in the financial statements of a prior period discovered after the financial statements are issued or are available to be issued (as discussed in Section 855-10-25) shall be reported as an error correction, by restating the prior-period financial statements. [Restatement](https://asc.understandingaccounting.org/glossary/r/#restatement "The process of revising previously issued financial statements to reflect the correction of an error in those financial statements.") requires all of the following: 1. a The cumulative effect of the error on periods prior to those presented shall be reflected in the carrying amounts of assets and liabilities as of the beginning of the first period presented. 2. b An offsetting adjustment, if any, shall be made to the opening balance of retained earnings (or other appropriate components of equity or net assets in the statement of financial position) for that period. 3. c Financial statements for each individual prior period presented shall be adjusted to reflect correction of the period-specific effects of the error. ##### [250-10-45-24](https://asc.understandingaccounting.org/asc/250/10/#250-10-45-24) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:07.240Z to 2026-09-09T23:17:07.240Z Record version: sha256:1a48ae9d0e32e4beff2433776e8a42eb2edb9e7512ac393b009d4fb4dd117835 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Those items that are reported as error corrections shall, in single period statements, be reflected as adjustments of the opening balance of retained earnings. When comparative statements are presented, corresponding adjustments should be made of the amounts of net income (and the components thereof) and retained earnings balances (as well as of other affected balances) for all of the periods reported therein, to reflect the retroactive application of the error corrections. ##### [250-10-45-25](https://asc.understandingaccounting.org/asc/250/10/#250-10-45-25) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:07.240Z to 2026-09-09T23:17:07.240Z Record version: sha256:cbab061ef81d66b111f80085ae4dd398d54c5ee8177bec5ecf8db3a3955fcd9f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For purposes of this Subtopic, an adjustment related to prior interim periods of the current fiscal year is an adjustment or settlement of litigation or similar claims, of income taxes (except for the effects of retroactive tax legislation), of renegotiation proceedings, or of utility revenue under rate-making processes provided that the adjustment or settlement meets all of the following criteria: 1. a The effect of the adjustment or settlement is material in relation to income from continuing operations of the current fiscal year or in relation to the trend of income from continuing operations or is material by other appropriate criteria. 2. b All or part of the adjustment or settlement can be specifically identified with and is directly related to business activities of specific prior interim periods of the current fiscal year. 3. c The amount of the adjustment or settlement could not be reasonably estimated prior to the current interim period but becomes reasonably estimable in the current interim period. The criterion in (b) is not met solely because of incidental effects such as interest on a settlement. The criterion in (c) would be met by the occurrence of an event with currently measurable effects such as a final decision on a rate order. Treatment as adjustments related to prior interim periods of the current fiscal year shall not be applied to the normal recurring corrections and adjustments that are the result of the use of estimates inherent in the accounting process. Changes in provisions for doubtful accounts shall not be considered to be adjustments related to prior interim periods of the current fiscal year even though the changes result from litigation or similar claims. ##### [250-10-45-26](https://asc.understandingaccounting.org/asc/250/10/#250-10-45-26) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:07.240Z to 2026-09-09T23:17:07.240Z Record version: sha256:ab97240bf9a431f3ba09d8d21e47154bca28c215f53e2ae3582e3dd877465757 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If an item of profit or loss occurs in other than the first interim period of the entity's fiscal year and all or a part of the item of profit or loss is an adjustment related to prior interim periods of the current fiscal year, as defined in the preceding paragraph, the item shall be reported as follows: 1. a The portion of the item that is directly related to business activities of the entity during the current interim period, if any, shall be included in the determination of net income for that period. 2. b Prior interim periods of the current fiscal year shall be restated to include the portion of the item that is directly related to business activities of the entity during each prior interim period in the determination of net income for that period. 3. c The portion of the item that is directly related to business activities of the entity during prior fiscal years, if any, shall be included in the determination of net income of the first interim period of the current fiscal year. #### Materiality Considerations for Correction of an Error ##### [250-10-45-27](https://asc.understandingaccounting.org/asc/250/10/#250-10-45-27) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:07.240Z to 2026-09-09T23:17:07.240Z Record version: sha256:18ab4012eef988387824c92203d791b372d31cdf8b702b0e4f075f66eedac631 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In considering materiality for the purpose of reporting the correction of an error, amounts shall be related to the estimated income for the full fiscal year and also to the effect on the trend of earnings. (See paragraph [250-10-50-12](https://asc.understandingaccounting.org/asc/250/10/#250-10-50-12).) #### Historical Summaries of Financial Data ##### [250-10-45-28](https://asc.understandingaccounting.org/asc/250/10/#250-10-45-28) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:07.240Z to 2026-09-09T23:17:07.240Z Record version: sha256:303417f08c21ed043f81b7c02cfd218e041998d181c2c594ca8f9b21e341863b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. It has become customary for business entities to present historical, statistical-type summaries of financial data for a number of periods—commonly 5 or 10 years. Whenever error corrections have been recorded during any of the periods included therein, the reported amounts of net income (and the components thereof), as well as other affected items, shall be appropriately restated, with disclosure in the first summary published after the adjustments. (See paragraph [250-10-50-7A](https://asc.understandingaccounting.org/asc/250/10/#250-10-50-7A).) Source downloaded (UTC): 2026-09-09T23:17:09.179Z to 2026-09-09T23:17:09.179Z Record version: sha256:7a90d36906da3b9d7db8333ef09b88bef6a404facee15a7938655487c6992ae2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 250-10-50: 50 Disclosure [Read section](https://asc.understandingaccounting.org/asc/250/10/#50-disclosure) SEC content: no #### Accounting Changes ##### [250-10-50-1](https://asc.understandingaccounting.org/asc/250/10/#250-10-50-1) Pending content: yes Source downloaded (UTC): 2026-09-09T23:17:09.179Z to 2026-09-09T23:17:09.179Z Record version: sha256:a1f594c27b8f655c2350d8499c6e919cf5c0748a44411388e55a50ec40b5c481 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall disclose all of the following in the fiscal period in which a [change in accounting principle](https://asc.understandingaccounting.org/glossary/c/#change-in-accounting-principle "A change from one generally accepted accounting principle to another generally accepted accounting principle when there are two or more generally accepted accounting principles that apply or when the accounting principle formerly used is no longer generally accepted. A change in the method of applying an accounting principle also is considered a change in accounting principle.") is made: 1. a The nature of and reason for the change in accounting principle, including an explanation of why the newly adopted accounting principle is preferable. 2. b The method of applying the change, including all of the following: 1. 1 A description of the prior-period information that has been retrospectively adjusted, if any. 2. 2 The effect of the change on income from continuing operations, net income (or other appropriate captions of changes in the applicable net assets or performance indicator), any other affected financial statement line item, and any affected per-share amounts for the current period and any prior periods retrospectively adjusted. Presentation of the effect on financial statement subtotals and totals other than income from continuing operations and net income (or other appropriate captions of changes in the applicable net assets or performance indicator) is not required. 3. 3 The cumulative effect of the change on retained earnings or other components of equity or net assets in the statement of financial position as of the beginning of the earliest period presented. 4. 4 If [retrospective application](https://asc.understandingaccounting.org/glossary/r/#retrospective-application "The application of a different accounting principle to one or more previously issued financial statements, or to the statement of financial position at the beginning of the current period, as if that principle had always been used, or a change to financial statements of prior accounting periods to present the financial statements of a new reporting entity as if it had existed in those prior years.") to all prior periods is impracticable, disclosure of the reasons therefore, and a description of the alternative method used to report the change (see paragraphs [250-10-45-5 through 45-7](https://asc.understandingaccounting.org/asc/250/10/#250-10-45-5) ). 3. c If [indirect effects of a change in accounting principle](https://asc.understandingaccounting.org/glossary/i/#indirect-effects-of-a-change-in-accounting-principle "Any changes to current or future cash flows of an entity that result from making a change in accounting principle that is applied retrospectively. An example of an indirect effect is a change in a nondiscretionary profit sharing or royalty payment that is based on a reported amount such as revenue or net income.") are recognized both of the following shall be disclosed: 1. 1 A description of the indirect effects of a change in accounting principle, including the amounts that have been recognized in the current period, and the related per-share amounts, if applicable 2. 2 Unless impracticable, the amount of the total recognized indirect effects of the [accounting change](https://asc.understandingaccounting.org/glossary/a/#accounting-change "A change in an accounting principle, an accounting estimate, or the reporting entity. The correction of an error in previously issued financial statements is not an accounting change.") and the related per-share amounts, if applicable, that are attributable to each prior period presented. Compliance with this disclosure requirement is practicable unless an entity cannot comply with it after making every reasonable effort to do so. Financial statements of subsequent periods need not repeat the disclosures required by this paragraph. If a change in accounting principle has no material effect in the period of change but is reasonably certain to have a material effect in later periods, the disclosures required by (a) shall be provided whenever the financial statements of the period of change are presented. Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance: [270-10-65-1](https://asc.understandingaccounting.org/asc/270/10/#270-10-65-1)An entity shall disclose all of the following in the fiscal period (which may be an interim or annual reporting period) in which a [change in accounting principle](https://asc.understandingaccounting.org/glossary/c/#change-in-accounting-principle "A change from one generally accepted accounting principle to another generally accepted accounting principle when there are two or more generally accepted accounting principles that apply or when the accounting principle formerly used is no longer generally accepted. A change in the method of applying an accounting principle also is considered a change in accounting principle.") is made: 1. a The nature of and reason for the change in accounting principle, including an explanation of why the newly adopted accounting principle is preferable. 2. b The method of applying the change, including all of the following: 1. 1 A description of the prior-period information that has been retrospectively adjusted, if any. 2. 2 The effect of the change on income from continuing operations, net income (or other appropriate captions of changes in the applicable net assets or performance indicator), any other affected financial statement line item, and any affected per-share amounts for the current period and any prior periods retrospectively adjusted. Presentation of the effect on financial statement subtotals and totals other than income from continuing operations and net income (or other appropriate captions of changes in the applicable net assets or performance indicator) is not required. 3. 3 The cumulative effect of the change on retained earnings or other components of equity or net assets in the statement of financial position as of the beginning of the earliest period presented. 4. 4 If [retrospective application](https://asc.understandingaccounting.org/glossary/r/#retrospective-application "The application of a different accounting principle to one or more previously issued financial statements, or to the statement of financial position at the beginning of the current period, as if that principle had always been used, or a change to financial statements of prior accounting periods to present the financial statements of a new reporting entity as if it had existed in those prior years.") to all prior periods is impracticable, disclosure of the reasons therefore, and a description of the alternative method used to report the change (see paragraphs [250-10-45-5 through 45-7](https://asc.understandingaccounting.org/asc/250/10/#250-10-45-5) ). 3. c If [indirect effects of a change in accounting principle](https://asc.understandingaccounting.org/glossary/i/#indirect-effects-of-a-change-in-accounting-principle "Any changes to current or future cash flows of an entity that result from making a change in accounting principle that is applied retrospectively. An example of an indirect effect is a change in a nondiscretionary profit sharing or royalty payment that is based on a reported amount such as revenue or net income.") are recognized both of the following shall be disclosed: 1. 1 A description of the indirect effects of a change in accounting principle, including the amounts that have been recognized in the current period, and the related per-share amounts, if applicable 2. 2 Unless impracticable, the amount of the total recognized indirect effects of the [accounting change](https://asc.understandingaccounting.org/glossary/a/#accounting-change "A change in an accounting principle, an accounting estimate, or the reporting entity. The correction of an error in previously issued financial statements is not an accounting change.") and the related per-share amounts, if applicable, that are attributable to each prior period presented. Compliance with this disclosure requirement is practicable unless an entity cannot comply with it after making every reasonable effort to do so. Financial statements of subsequent periods need not repeat the disclosures required by this paragraph. If a change in accounting principle has no material effect in the period of change but is reasonably certain to have a material effect in later periods, the disclosures required by (a) shall be provided whenever the financial statements of the period of change are presented. ##### [250-10-50-2](https://asc.understandingaccounting.org/asc/250/10/#250-10-50-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:09.179Z to 2026-09-09T23:17:09.179Z Record version: sha256:a000630caa75a36529cfa96b527e95a2f6c7b82c8831f21e8f9d886ccc0a39bf Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity that issues interim financial statements shall provide the required disclosures in the financial statements of both the interim period of the change and the annual period of the change. ##### [250-10-50-3](https://asc.understandingaccounting.org/asc/250/10/#250-10-50-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:09.179Z to 2026-09-09T23:17:09.179Z Record version: sha256:f94fa5950fa0b97fc011158fb0c8bb351e119ce289db597ba957e2d5cae6af78 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In the fiscal year in which a new accounting principle is adopted, financial information reported for interim periods after the date of adoption shall disclose the effect of the change on income from continuing operations, net income (or other appropriate captions of changes in the applicable net assets or performance indicator), and related per-share amounts, if applicable, for those post-change interim periods. ##### [250-10-50-4](https://asc.understandingaccounting.org/asc/250/10/#250-10-50-4) Pending content: yes Source downloaded (UTC): 2026-09-09T23:17:09.179Z to 2026-09-09T23:17:09.179Z Record version: sha256:ce765092f5537168559fa8efea1926b7d77df44bc1e4e541fbe15f26c7c05dea Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The effect on income from continuing operations, net income (or other appropriate captions of changes in the applicable net assets or performance indicator), and any related per-share amounts of the current period shall be disclosed for a change in estimate that affects several future periods, such as a change in service lives of depreciable assets. Disclosure of those effects is not necessary for estimates made each period in the ordinary course of accounting for items such as uncollectible accounts or inventory obsolescence; however, disclosure is required if the effect of a change in the estimate is material. When an entity effects a change in estimate by changing an accounting principle, the disclosures required by paragraphs [250-10-50-1 through 50-3](https://asc.understandingaccounting.org/asc/250/10/#250-10-50-1) also are required. If a change in estimate does not have a material effect in the period of change but is reasonably certain to have a material effect in later periods, a description of that change in estimate shall be disclosed whenever the financial statements of the period of change are presented. Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance: [270-10-65-1](https://asc.understandingaccounting.org/asc/270/10/#270-10-65-1)The effect on income from continuing operations, net income (or other appropriate captions of changes in the applicable net assets or performance indicator), and any related per-share amounts of the current period shall be disclosed for a change in estimate that affects several future periods, such as a change in service lives of depreciable assets. Disclosure of those effects is not necessary for estimates made each period in the ordinary course of accounting for items such as uncollectible accounts or inventory obsolescence; however, disclosure is required if the effect of a change in the estimate is material. When an entity effects a change in estimate by changing an accounting principle, the disclosures required by paragraphs [250-10-50-1 through 50-3](https://asc.understandingaccounting.org/asc/250/10/#250-10-50-1) also are required. If a change in estimate does not have a material effect in the period of change but is reasonably certain to have a material effect in later periods, a description of that change in estimate shall be disclosed whenever the financial statements of the period of change are presented. The disclosures in this paragraph are required in interim and annual reporting periods. ##### [250-10-50-5](https://asc.understandingaccounting.org/asc/250/10/#250-10-50-5) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:09.179Z to 2026-09-09T23:17:09.179Z Record version: sha256:28188e142ebb7f958398835650d9dbeb9d0e8db75206612263f2b5d3818115c0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The disclosure provisions of this Subtopic for a [change in accounting estimate](https://asc.understandingaccounting.org/glossary/c/#change-in-accounting-estimate "A change that has the effect of adjusting the carrying amount of an existing asset or liability or altering the subsequent accounting for existing or future assets or liabilities. A change in accounting estimate is a necessary consequence of the assessment, in conjunction with the periodic presentation of financial statements, of the present status and expected future benefits and obligations associated with assets and liabilities. Changes in accounting estimates result from new information. Examples of items for which estimates are necessary are uncollectible receivables, inventory obsolescence, service lives and salvage values of depreciable assets, and warranty obligations.") are not required for revisions resulting from a change in a valuation technique used to measure fair value or its application when the resulting measurement is fair value in accordance with Topic 820. ##### [250-10-50-6](https://asc.understandingaccounting.org/asc/250/10/#250-10-50-6) Pending content: yes Source downloaded (UTC): 2026-09-09T23:17:09.179Z to 2026-09-09T23:17:09.179Z Record version: sha256:b0c4636031721251cb32a7ad1c636db2277aa6374a33e8a533ac66da3edf1d2b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. When there has been a [change in the reporting entity](https://asc.understandingaccounting.org/glossary/c/#change-in-the-reporting-entity "A change that results in financial statements that, in effect, are those of a different reporting entity. A change in the reporting entity is limited mainly to the following: Presenting consolidated or combined financial statements in place of financial statements of individual entities Changing specific subsidiaries that make up the group of entities for which consolidated financial statements are presented Changing the entities included in combined financial statements. Neither a business combination accounted for by the acquisition method nor the consolidation of a variable interest entity (VIE) pursuant to Topic 810 is a change in reporting entity."), the financial statements of the period of the change shall describe the nature of the change and the reason for it. In addition, the effect of the change on income from continuing operations, net income (or other appropriate captions of changes in the applicable net assets or performance indicator), other comprehensive income, and any related per-share amounts shall be disclosed for all periods presented. Financial statements of subsequent periods need not repeat the disclosures required by this paragraph. If a change in reporting entity does not have a material effect in the period of change but is reasonably certain to have a material effect in later periods, the nature of and reason for the change shall be disclosed whenever the financial statements of the period of change are presented. (Sections 805-10-50, 805-20-50, 805-30-50, and 805-740-50 describe the manner of reporting and the disclosures required for a business combination.) Transition date:(P) June 30, 2027; (N) June 30, 2027Transition guidance: [105-10-65-7](https://asc.understandingaccounting.org/asc/105/10/#105-10-65-7)When there has been a [change in the reporting entity](https://asc.understandingaccounting.org/glossary/c/#change-in-the-reporting-entity "A change that results in financial statements that, in effect, are those of a different reporting entity. A change in the reporting entity is limited mainly to the following: Presenting consolidated or combined financial statements in place of financial statements of individual entities Changing specific subsidiaries that make up the group of entities for which consolidated financial statements are presented Changing the entities included in combined financial statements. Neither a business combination accounted for by the acquisition method nor the consolidation of a variable interest entity (VIE) pursuant to Topic 810 is a change in reporting entity."), the financial statements of both the interim period of the change and the annual period of the change shall describe the nature of the change and the reason for it. In addition, the effect of the change on income from continuing operations, net income (or other appropriate captions of changes in the applicable net assets or performance indicator), other comprehensive income, and any related per-share amounts shall be disclosed for all periods presented. The cumulative effect of the change on retained earnings or other appropriate components of equity or net assets in the statement of financial position as of the beginning of the earliest period presented also shall be disclosed. Financial statements of subsequent periods need not repeat the disclosures required by this paragraph. If a change in reporting entity does not have a material effect in the period of change but is reasonably certain to have a material effect in later periods, the nature of and reason for the change shall be disclosed whenever the financial statements of the period of change are presented. See paragraph [270-10-45-12](https://asc.understandingaccounting.org/asc/270/10/#270-10-45-12) for additional guidance related to accounting changes in interim periods. (Sections 805-10-50, 805-20-50, 805-30-50, and 805-740-50 describe the manner of reporting and the disclosures required for a business combination.) Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance: [270-10-65-1](https://asc.understandingaccounting.org/asc/270/10/#270-10-65-1)When there has been a [change in the reporting entity](https://asc.understandingaccounting.org/glossary/c/#change-in-the-reporting-entity "A change that results in financial statements that, in effect, are those of a different reporting entity. A change in the reporting entity is limited mainly to the following: Presenting consolidated or combined financial statements in place of financial statements of individual entities Changing specific subsidiaries that make up the group of entities for which consolidated financial statements are presented Changing the entities included in combined financial statements. Neither a business combination accounted for by the acquisition method nor the consolidation of a variable interest entity (VIE) pursuant to Topic 810 is a change in reporting entity."), the financial statements of both the interim period of the change and the annual period of the change shall describe the nature of the change and the reason for it. In addition, the effect of the change on income from continuing operations, net income (or other appropriate captions of changes in the applicable net assets or performance indicator), other comprehensive income, and any related per-share amounts shall be disclosed for all periods presented. Financial statements of subsequent periods need not repeat the disclosures required by this paragraph. If a change in reporting entity does not have a material effect in the period of change but is reasonably certain to have a material effect in later periods, the nature of and reason for the change shall be disclosed whenever the financial statements of the period of change are presented. (Sections 805-10-50, 805-20-50, 805-30-50, and 805-740-50 describe the manner of reporting and the disclosures required for a business combination.) #### Correction of an Error in Previously Issued Financial Statements ##### [250-10-50-7](https://asc.understandingaccounting.org/asc/250/10/#250-10-50-7) Pending content: yes Source downloaded (UTC): 2026-09-09T23:17:09.179Z to 2026-09-09T23:17:09.179Z Record version: sha256:8cb691a26eecb32a4e73c863306573dc0cc219486b37a3156d600df8a29e05eb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. When financial statements are restated to correct an error, the entity shall disclose that its previously issued financial statements have been restated, along with a description of the nature of the error. The entity also shall disclose both of the following: 1. a The effect of the correction on each financial statement line item and any per-share amounts affected for each prior period presented 2. b The cumulative effect of the change on retained earnings or other appropriate components of equity or net assets in the statement of financial position, as of the beginning of the earliest period presented. Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance: [270-10-65-1](https://asc.understandingaccounting.org/asc/270/10/#270-10-65-1)When financial statements are restated to correct an error, the entity shall disclose that its previously issued financial statements have been restated, along with a description of the nature of the error. The entity also shall disclose both of the following in interim and annual reporting periods: 1. a The effect of the correction on each financial statement line item and any per-share amounts affected for each prior period presented 2. b The cumulative effect of the change on retained earnings or other appropriate components of equity or net assets in the statement of financial position, as of the beginning of the earliest period presented. ##### [250-10-50-7A](https://asc.understandingaccounting.org/asc/250/10/#250-10-50-7A) Pending content: yes Source downloaded (UTC): 2026-09-09T23:17:09.179Z to 2026-09-09T23:17:09.179Z Record version: sha256:63a5bbcffb9db1768aa1b4a68056dd83ce4cf5bae8e48beb98978281566e049b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity that restates historical, statistical-type summaries of financial data for error corrections shall disclose that information in accordance with paragraph [250-10-45-28](https://asc.understandingaccounting.org/asc/250/10/#250-10-45-28). Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance: [270-10-65-1](https://asc.understandingaccounting.org/asc/270/10/#270-10-65-1)For interim and annual reporting periods, an entity that restates historical, statistical-type summaries of financial data for error corrections shall disclose that information in accordance with paragraph [250-10-45-28](https://asc.understandingaccounting.org/asc/250/10/#250-10-45-28). ##### [250-10-50-8](https://asc.understandingaccounting.org/asc/250/10/#250-10-50-8) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:09.179Z to 2026-09-09T23:17:09.179Z Record version: sha256:9d31fc966f497d894e5dfaba87a04eab91774d9fcf55f461ffde2a2709f6ade3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. When prior period adjustments are recorded, the resulting effects (both gross and net of applicable income tax) on the net income of prior periods shall be disclosed in the annual report for the year in which the adjustments are made and in interim reports issued during that year after the date of recording the adjustments. ##### [250-10-50-9](https://asc.understandingaccounting.org/asc/250/10/#250-10-50-9) Pending content: yes Source downloaded (UTC): 2026-09-09T23:17:09.179Z to 2026-09-09T23:17:09.179Z Record version: sha256:139d9e5521baab20a4854a84076edd22e539f5015f69b04bcb727a4c4c62b66d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. When financial statements for a single period only are presented, this disclosure shall indicate the effects of such [restatement](https://asc.understandingaccounting.org/glossary/r/#restatement "The process of revising previously issued financial statements to reflect the correction of an error in those financial statements.") on the balance of retained earnings at the beginning of the period and on the net income of the immediately preceding period. When financial statements for more than one period are presented, which is ordinarily the preferable procedure, the disclosure shall include the effects for each of the periods included in the statements. (See Section 205-10-45 and paragraph [205-10-50-1](https://asc.understandingaccounting.org/asc/205/10/#205-10-50-1).) Such disclosures shall include the amounts of income tax applicable to the prior period adjustments. Disclosure of restatements in annual reports issued after the first such post-revision disclosure would ordinarily not be required. Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance: [270-10-65-1](https://asc.understandingaccounting.org/asc/270/10/#270-10-65-1)When financial statements for a single period only are presented, the disclosure required in paragraph [250-10-50-8](https://asc.understandingaccounting.org/asc/250/10/#250-10-50-8)shall indicate the effects of such [restatement](https://asc.understandingaccounting.org/glossary/r/#restatement "The process of revising previously issued financial statements to reflect the correction of an error in those financial statements.") on the balance of retained earnings at the beginning of the period and on the net income of the immediately preceding period. When financial statements for more than one period are presented, which is ordinarily the preferable procedure, the disclosure shall include the effects for each of the periods included in the statements. (See Section 205-10-45 and paragraph [205-10-50-1](https://asc.understandingaccounting.org/asc/205/10/#205-10-50-1).) Such disclosures shall include the amounts of income tax applicable to the prior period adjustments. Disclosure of restatements in annual reports issued after the first such post-revision disclosure would ordinarily not be required. ##### [250-10-50-10](https://asc.understandingaccounting.org/asc/250/10/#250-10-50-10) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:09.179Z to 2026-09-09T23:17:09.179Z Record version: sha256:f4190503f45679507df19628207bcb1d93b8b7e2c1df7e54f832f57c53f84ba4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Financial statements of subsequent periods shall not repeat the disclosures required by paragraphs [250-10-50-7 through 50-9](https://asc.understandingaccounting.org/asc/250/10/#250-10-50-7) . See paragraph [250-10-50-2](https://asc.understandingaccounting.org/asc/250/10/#250-10-50-2). ##### [250-10-50-11](https://asc.understandingaccounting.org/asc/250/10/#250-10-50-11) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:09.179Z to 2026-09-09T23:17:09.179Z Record version: sha256:6e7adf4f33460b96ab78a832b3139e9b9394e85e4cf034b0a392eb48e11bb3cd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following disclosures shall be made in interim financial reports about an adjustment related to prior interim periods of the current fiscal year. In financial reports for the interim period in which the adjustment occurs, disclosure shall be made of both of the following: 1. a The effect on income from continuing operations, net income, and related per-share amounts for each prior interim period of the current fiscal year 2. b Income from continuing operations, net income, and related per-share amounts for each prior interim period restated in accordance with paragraph [250-10-45-26](https://asc.understandingaccounting.org/asc/250/10/#250-10-45-26). #### Materiality Considerations for Correction of an Error ##### [250-10-50-12](https://asc.understandingaccounting.org/asc/250/10/#250-10-50-12) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:09.179Z to 2026-09-09T23:17:09.179Z Record version: sha256:97b79f4473e719bcf05dd71c8441c035de64c152ec94735c2acdb16ed5d3f39d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In considering materiality for the purpose of reporting the correction of an error, amounts shall be related to the estimated income for the full fiscal year and also to the effect on the trend of earnings. Changes that are material with respect to an interim period but not material with respect to the estimated income for the full fiscal year or to the trend of earnings shall be separately disclosed in the interim period. (See paragraph [250-10-45-27](https://asc.understandingaccounting.org/asc/250/10/#250-10-45-27).) Source downloaded (UTC): 2026-09-09T23:17:12.020Z to 2026-09-09T23:17:12.020Z Record version: sha256:fdc7bad6d9f549302a1a7f139a82a239bb1f8254fa80b0d60cf8102ef84f4515 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 250-10-55: 55 Implementation Guidance and Illustrations [Read section](https://asc.understandingaccounting.org/asc/250/10/#55-implementation-guidance-and-illustrations) SEC content: no #### Implementation Guidance ##### [250-10-55-1](https://asc.understandingaccounting.org/asc/250/10/#250-10-55-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:12.020Z to 2026-09-09T23:17:12.020Z Record version: sha256:391d7ac1c64854b167c7cc0539610b60579a64c718abab67f7cbd300fed0e912 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A change in composition of the elements of cost included in inventory is an [accounting change](https://asc.understandingaccounting.org/glossary/a/#accounting-change "A change in an accounting principle, an accounting estimate, or the reporting entity. The correction of an error in previously issued financial statements is not an accounting change."). An entity that makes such a change for financial reporting shall conform to the requirements of this Subtopic, including justifying the change on the basis of preferability as specified by paragraphs [250-10-45-11 through 45-13](https://asc.understandingaccounting.org/asc/250/10/#250-10-45-11) . In applying the guidance in this Subtopic, preferability among accounting principles shall be determined on the basis of whether the new principle constitutes an improvement in financial reporting and not on the basis of the income tax effect alone. #### Illustrations ##### [250-10-55-2](https://asc.understandingaccounting.org/asc/250/10/#250-10-55-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:12.020Z to 2026-09-09T23:17:12.020Z Record version: sha256:b5af66d7e3a29ae38cd054a7ec29d5d31750097a6a6fa8e410052e9ebb644aaf Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Section presents generalized Examples intended to illustrate how to apply certain provisions of this Subtopic. The Examples do not address all possible situations or applications of this Subtopic, nor do they establish additional requirements. ##### [250-10-55-3](https://asc.understandingaccounting.org/asc/250/10/#250-10-55-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:12.020Z to 2026-09-09T23:17:12.020Z Record version: sha256:3d8bb29e14c405172dc75f336663830898ff435fd98b74c04cce971813fed96f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates the guidance in paragraphs [250-10-45-5 through 45-8](https://asc.understandingaccounting.org/asc/250/10/#250-10-45-5) . Entity A decides at the beginning of 20X7 to adopt the first-in, first-out (FIFO) method of inventory valuation. Entity A had used the last-in, first-out (LIFO) method for financial and tax reporting since its inception on January 1, 20X5, and had maintained records that are adequate to apply the FIFO method retrospectively. Entity A concluded that the FIFO method is the preferable inventory valuation method for its inventory. The [change in accounting principle](https://asc.understandingaccounting.org/glossary/c/#change-in-accounting-principle "A change from one generally accepted accounting principle to another generally accepted accounting principle when there are two or more generally accepted accounting principles that apply or when the accounting principle formerly used is no longer generally accepted. A change in the method of applying an accounting principle also is considered a change in accounting principle.") is reported through [retrospective application](https://asc.understandingaccounting.org/glossary/r/#retrospective-application "The application of a different accounting principle to one or more previously issued financial statements, or to the statement of financial position at the beginning of the current period, as if that principle had always been used, or a change to financial statements of prior accounting periods to present the financial statements of a new reporting entity as if it had existed in those prior years.") as described in paragraph [250-10-45-5](https://asc.understandingaccounting.org/asc/250/10/#250-10-45-5). ##### [250-10-55-4](https://asc.understandingaccounting.org/asc/250/10/#250-10-55-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:12.020Z to 2026-09-09T23:17:12.020Z Record version: sha256:0f0e39bf1ed21731148e22515871df333638b1228c508d86ae7ad00402e03e1e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The effects of the change in accounting principle on inventory and cost of sales are presented in the following table. - ![ ](https://asc.understandingaccounting.org/asc-img/GUID-AE3AABAD-F1AD-4D9B-BEF3-12996B9FBD76-low.gif) Inventory Determined by Cost of Sales Determined by Date LIFO Method FIFO Method LIFO Method FIFO Method 1/1/20X5 $- $- $- $- 12/31/20X5 100 80 800 820 12/31/20X6 200 240 " 1,000 " 940 12/31/20X7 320 390 " 1,130 " " 1,100 " ##### [250-10-55-5](https://asc.understandingaccounting.org/asc/250/10/#250-10-55-5) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:12.020Z to 2026-09-09T23:17:12.020Z Record version: sha256:1ca1600ff7c8885127056725807e059afeddb62b0bed99de6f1f497f2370d231 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example is based on the following assumptions: 1. a For each year presented, sales are $3,000 and selling, general, and administrative costs are $1,000. Entity A's effective income tax rate for all years is 40 percent, and there are no permanent or temporary differences under Subtopic 740-10 prior to the change. 2. b Entity A has a nondiscretionary profit-sharing agreement in place for all years. Under that agreement, Entity A is required to contribute 10 percent of its reported income before tax and profit sharing to a profit-sharing pool to be distributed to employees. For simplicity, it is assumed that the profit-sharing contribution is not an inventoriable cost. 3. c Entity A determined that its profit-sharing expense would have decreased by $2 in 20X5 and increased by $6 in 20X6 if it had used the FIFO method to compute its inventory cost since inception. The terms of the profit-sharing agreement do not address whether Entity A is required to adjust its profit-sharing accrual for the incremental amounts. At the time of the accounting change, Entity A decides to contribute the additional $6 attributable to 20X6 profit and to make no adjustment related to 20X5 profit. The $6 payment is made in 20X7. 4. d Profit sharing and income taxes accrued at each year-end under the LIFO method are paid in cash at the beginning of each following year. 5. e Entity A's annual report to shareholders provides two years of financial results, and Entity A is not subject to the requirements of Subtopic 260-10. ##### [250-10-55-6](https://asc.understandingaccounting.org/asc/250/10/#250-10-55-6) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:12.020Z to 2026-09-09T23:17:12.020Z Record version: sha256:d3fe1bb9429bb087eda54087119a5acc881fbc68ce99e59692235e55bbac6301 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In accordance with paragraph [250-10-45-8](https://asc.understandingaccounting.org/asc/250/10/#250-10-45-8), recognized [indirect effects of a change in accounting principle](https://asc.understandingaccounting.org/glossary/i/#indirect-effects-of-a-change-in-accounting-principle "Any changes to current or future cash flows of an entity that result from making a change in accounting principle that is applied retrospectively. An example of an indirect effect is a change in a nondiscretionary profit sharing or royalty payment that is based on a reported amount such as revenue or net income.") are recorded in the period of change. That provision applies even if recognition of the indirect effect is explicitly required by the terms of the profit-sharing contract. ##### [250-10-55-7](https://asc.understandingaccounting.org/asc/250/10/#250-10-55-7) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:12.020Z to 2026-09-09T23:17:12.020Z Record version: sha256:f19c9b7a47f957ef20ebff4e4d717b5daf93dfb5ffd6889e02c8b0629f60d46a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Entity A's income statements as originally reported under the LIFO method are presented below. ##### [250-10-55-8](https://asc.understandingaccounting.org/asc/250/10/#250-10-55-8) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:12.020Z to 2026-09-09T23:17:12.020Z Record version: sha256:fc652ebd4d29898693573ee989c66200279bd3bf78a6a61486fbf1ed5dbcf9df Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Income Statement - ![ ](https://asc.understandingaccounting.org/asc-img/GUID-4159CB7D-C202-4368-9D0F-F74F77D001C4-low.gif) 20X6 20X5 Sales " $3,000 " " $3,000 " Cost of goods sold " 1,000 " 800 "Selling, general, and administrative expenses" " 1,000 " " 1,000 " Income before profit sharing and income taxes " 1,000 " " 1,200 " Profit sharing 100 120 Income before income taxes 900 " 1,080 " Income taxes 360 432 Net income $540 $648 ##### [250-10-55-9](https://asc.understandingaccounting.org/asc/250/10/#250-10-55-9) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:12.020Z to 2026-09-09T23:17:12.020Z Record version: sha256:99231cb5645a6cf202e8cf2c482d0ddae746025b6dee92a8b2062de29a9f9354 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Entity A's income statements reflecting the retrospective application of the accounting change from the LIFO method to the FIFO method are presented below. ##### [250-10-55-10](https://asc.understandingaccounting.org/asc/250/10/#250-10-55-10) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:12.020Z to 2026-09-09T23:17:12.020Z Record version: sha256:72a838e515b42cd22cc3d950b531201ab8b097bc830cc5c3e11f6132d8a2f84d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Income Statement - ![ ](https://asc.understandingaccounting.org/asc-img/GUID-935C2846-CEA8-4714-870E-E4DF945295ED-low.gif) 20X7 20X6 As Adjusted (Note A) Sales " $3,000 " " $3,000 " Cost of goods sold " 1,100 " 940 "Selling, general, and administrative expenses" " 1,000 " " 1,000 " Income before profit sharing and income taxes 900 " 1,060 " Profit sharing 96 100 Income before income taxes 804 960 Income taxes 322 384 Net income $482 $576 ##### [250-10-55-11](https://asc.understandingaccounting.org/asc/250/10/#250-10-55-11) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:12.020Z to 2026-09-09T23:17:12.020Z Record version: sha256:119d5315abd7b16a6793531ca24f6704365d537af5e952d9f63330b4029535e5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Entity A's disclosure related to the accounting change is presented below. - NOTE A: - Change in Method of Accounting for Inventory Valuation - On January 1, 20X7, Entity A elected to change its method of valuing its inventory to the FIFO method, whereas in all prior years inventory was valued using the LIFO method. The new method of accounting for inventory was adopted \[state justification for change in accounting principle\] and comparative financial statements of prior years have been adjusted to apply the new method retrospectively. The following financial statement line items for fiscal years 20X7 and 20X6 were affected by the change in accounting principle. - _Income Statement_ - ![ ](https://asc.understandingaccounting.org/asc-img/GUID-2384DB48-D3B3-498F-8A47-3424557422AE-low.gif) 20X7 As Computed under LIFO As Reported under FIFO Effect of Change Sales " $3,000 " " $3,000 " $- Cost of goods sold " 1,130 " " 1,100 " (30) "Selling, general, and administrative expenses" " 1,000 " " 1,000 " - Income before profit sharing and income taxes 870 900 30 Profit sharing 87 96 (a) 9 Income before income taxes 783 804 21 Income taxes 313 322 9 Net income $470 $482 $12 (a) "This amount includes a $90 profit-sharing payment attributable to 20X7 profits and $6 profit-sharing payment attributable to 20X6 profits, which is an indirect effect of the change in accounting principle. The incremental payment attributable to 20X6 would have been recognized in 20X6 if Entity A's inventory had originally been accounted for using the FIFO method." - ![ ](https://asc.understandingaccounting.org/asc-img/GUID-08EE57B3-4940-416B-B273-0CC8E420F624-low.gif) 20X6 As Originally Reported As Adjusted Effect of Change Sales " $3,000 " " $3,000 " $- Cost of goods sold " 1,000 " 940 (60) "Selling, general, and administrative expenses" " 1,000 " " 1,000 " - Income before profit sharing and income taxes " 1,000 " " 1,060 " 60 Profit sharing 100 100 - Income before income taxes 900 960 60 Income taxes 360 384 24 Net income $540 $576 $36 - _Balance Sheet_ - ![ ](https://asc.understandingaccounting.org/asc-img/GUID-38E890AA-287E-46B6-848F-ACF12B497919-low.gif) 12/31/X7 As Computed under LIFO As Reported under FIFO Effect of Change Cash " $2,738 " " $2,732 " $(6) Inventory 320 390 70 Total assets " $3,058 " " $3,122 " $64 Accrued profit sharing $87 $90 $3 Income tax liability 313 338 25 Total liabilities 400 428 28 Paid-in capital " 1,000 " " 1,000 " - Retained earnings " 1,658 " " 1,694 " 36 Total stockholders' equity " 2,658 " " 2,694 " 36 Total liabilities and stockholders' equity " $3,058 " " $3,122 " $64 - ![ ](https://asc.understandingaccounting.org/asc-img/GUID-C77A6A5B-229A-4777-BF34-FB80FA3E3019-low.gif) 12/31/X6 As Originally Reported As Adjusted Effect of Change Cash " $2,448 " " $2,448 " $- Inventory 200 240 40 Total assets " $2,648 " " $2,688 " $40 Accrued profit sharing 100 100 - Income tax liability 360 376 16 Total liabilities 460 476 16 Paid-in capital " 1,000 " " 1,000 " - Retained earnings " 1,188 " " 1,212 " 24 Total stockholders' equity " 2,188 " " 2,212 " 24 Total liabilities and stockholders' equity " $2,648 " " $2,688 " $40 - As a result of the accounting change, retained earnings as of January 1, 20X6, decreased from $648, as originally reported using the LIFO method, to $636 using the FIFO method. - _Statement of Cash Flows_ - ![ ](https://asc.understandingaccounting.org/asc-img/GUID-B57780BD-FAAD-4F1B-BCB1-7DB73D8A58CF-low.gif) 20X7 As Computed under LIFO As Reported under FIFO Effect of Change Net income $470 $482 $12 Adjustments to reconcile net income to net cash provided by operating activities Increase in inventory (120) (150) (30) Decrease in accrued profit sharing (13) (10) 3 Decrease in income tax liability (47) (38) 9 Net cash provided by operating activities 290 284 (6) Net increase in cash 290 284 (6) "Cash, January 1, 20X7" " 2,448 " " 2,448 " - "Cash, December 31, 20X7" " $2,738 " " $2,732 " $(6) - ![ ](https://asc.understandingaccounting.org/asc-img/GUID-66F336B9-F685-42C2-BDAE-2D05406FBA66-low.gif) 20X6 As Originally Reported As Adjusted Effect of Change Net income $540 $576 $36 Adjustments to reconcile net income to net cash provided by operating activities Increase in inventory (100) (160) (60) Decrease in accrued profit sharing (20) (20) - Decrease in income tax liability (72) (48) 24 Net cash provided by operating activities 348 348 - Net increase in cash 348 348 - "Cash, January 1, 20X6" " 2,100 " " 2,100 " - "Cash, December 31, 20X6" " $2,448 " " $2,448 " $- ##### [250-10-55-12](https://asc.understandingaccounting.org/asc/250/10/#250-10-55-12) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:12.020Z to 2026-09-09T23:17:12.020Z Record version: sha256:e219c25925714806a55ffec01070c4a3cae49c7522de7ead9cbb19bdd826f702 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates the guidance in paragraphs [250-10-45-9 through 45-10](https://asc.understandingaccounting.org/asc/250/10/#250-10-45-9) . Assume Entity A changed its accounting principle for inventory measurement from FIFO to LIFO effective January 1, 20X4. Entity A reports its financial statements on a calendar year-end basis and had used the FIFO method since its inception. Entity A determined that it is impracticable to determine the cumulative effect of applying this change retrospectively because records of inventory purchases and sales are no longer available for all prior years. However, Entity A has all of the information necessary to apply the LIFO method on a prospective basis beginning in 20X1. Therefore, Entity A should present prior periods as if it had carried forward the 20X0 ending balance in inventory (measured on a FIFO basis) and begun applying the LIFO method to its inventory beginning January 1, 20X1. (The example assumes that Entity A established that the LIFO method was preferable for Entity A's inventory. No particular inventory measurement method is necessarily preferable in all instances.) Source downloaded (UTC): 2026-09-09T23:17:15.052Z to 2026-09-09T23:17:15.052Z Record version: sha256:04a97c92679322c1daf1fd136d01c01d5cda46e12abc4187a28632d7c2352ff4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 250-10-60: 60 Relationships [Read section](https://asc.understandingaccounting.org/asc/250/10/#60-relationships) SEC content: no #### Earnings per Share ##### [250-10-60-1](https://asc.understandingaccounting.org/asc/250/10/#250-10-60-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:15.052Z to 2026-09-09T23:17:15.052Z Record version: sha256:0f1b273367109430970af9fa4e35a58f97b61e50ded8d6c51fa027a6b1b909f6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For guidance on the effect of restatements expressed in per-share terms, see paragraphs [260-10-55-15 through 55-16](https://asc.understandingaccounting.org/asc/260/10/#260-10-55-15) . #### Investments—Equity Method and Joint Ventures ##### [250-10-60-2](https://asc.understandingaccounting.org/asc/250/10/#250-10-60-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:15.052Z to 2026-09-09T23:17:15.052Z Record version: sha256:541026838311cd4f3d9ad2a5038a767a9af845f05be85317d9b7cd0445da9cb2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For guidance on classification of an investor's share of error corrections reported in the financial statements of the investee, see paragraphs [323-10-45-1 through 45-2.](https://asc.understandingaccounting.org/asc/323/10/#323-10-45-1) Source downloaded (UTC): 2026-09-09T23:17:22.038Z to 2026-09-09T23:17:22.038Z Record version: sha256:8f179a82f9c86b13f7932e633023278b16664b35a274ce53c2bd54fb104ef3e0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 250-10-S00: SEC 00 Status [Read section](https://asc.understandingaccounting.org/asc/250/10/#sec-00-status) SEC content: yes ##### [250-10-S00-1](https://asc.understandingaccounting.org/asc/250/10/#250-10-S00-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:22.038Z to 2026-09-09T23:17:22.038Z Record version: sha256:3f747c201c868e99e63b3ebe9a45e4058a89262218a34ff6fd871736ec6438a9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following table identifies the changes made to this Subtopic.
ParagraphActionAccounting Standards UpdateDate
250-10-S99-1 through S99-5
AmendedAccounting Standards Update No. 2012-0308/27/2012
250-10-S99-6AddedAccounting Standards Update No. 2017-0301/23/2017
Source downloaded (UTC): 2026-09-09T23:17:23.892Z to 2026-09-09T23:17:23.892Z Record version: sha256:f863eb5762c8da5f21f28dec889477dfd1ac3b797c0c59882ac2efefc1c0a121 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 250-10-S50: SEC 50 Disclosure [Read section](https://asc.understandingaccounting.org/asc/250/10/#sec-50-disclosure) SEC content: yes #### Disclosure of the Impact that Recently Issued Accounting Standards Will Have on the Financial Statements of the Registrant when Adopted in a Future Period ##### [250-10-S50-1](https://asc.understandingaccounting.org/asc/250/10/#250-10-S50-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:23.892Z to 2026-09-09T23:17:23.892Z Record version: sha256:9520332856bc8aee8d0004f815e76ee49c8150821310b9b74d5ff3d6e3dfd933 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See paragraph [250-10-S99-5](https://asc.understandingaccounting.org/asc/250/10/#250-10-S99-5), SAB Topic 11.M, for SEC Staff views regarding disclosure of the impact of recently issued accounting standards. #### Retrospective Accounting Changes ##### [250-10-S50-2](https://asc.understandingaccounting.org/asc/250/10/#250-10-S50-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:23.892Z to 2026-09-09T23:17:23.892Z Record version: sha256:b1b9c95b16d8f46fb42e081c508931ee3c067b755e9bca6ca50e40b598f26f48 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See paragraph [220-10-S99-1(c)](https://asc.understandingaccounting.org/asc/220/10/#220-10-S99-1), Regulation S-X Rule 3-03(c), for income statement requirements regarding retrospective accounting changes. #### Adjustments Made to Beginning Stockholders' Equity for Retroactive Adjustments ##### [250-10-S50-3](https://asc.understandingaccounting.org/asc/250/10/#250-10-S50-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:23.892Z to 2026-09-09T23:17:23.892Z Record version: sha256:f42e19dc0abb17ce3bd74b41e09716d333659b762218c9da361bbb2c64620fbb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See paragraph [505-10-S99-1](https://asc.understandingaccounting.org/asc/505/10/#505-10-S99-1), Regulation S-X Rule 3-04, for disclosure requirements pertaining to retroactive adjustments made to beginning stockholders' equity for items before that period. #### Interim Financial Statement Disclosure of Date and Reasons for Material Accounting Changes ##### [250-10-S50-4](https://asc.understandingaccounting.org/asc/250/10/#250-10-S50-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:23.892Z to 2026-09-09T23:17:23.892Z Record version: sha256:ee3fe47ecdec3386ba2fb5b6dba558edaed94993ead44e5067c1410e705d8606 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See paragraph [270-10-S99-1(b)(6) and (b)(7)](https://asc.understandingaccounting.org/asc/270/10/#270-10-S99-1), Regulation S-X Rules 10-01(b)(6) and (7), for rules regarding accounting changes in interim financial statements. Source downloaded (UTC): 2026-09-09T23:17:25.726Z to 2026-09-09T23:17:25.726Z Record version: sha256:d4339faed4213363da9246c0b7e823b0aa5224184891ebff5514181ba4933877 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 250-10-S55: SEC 55 Implementation Guidance and Illustrations [Read section](https://asc.understandingaccounting.org/asc/250/10/#sec-55-implementation-guidance-and-illustrations) SEC content: yes #### Materiality ##### [250-10-S55-1](https://asc.understandingaccounting.org/asc/250/10/#250-10-S55-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:25.726Z to 2026-09-09T23:17:25.726Z Record version: sha256:514b8873925d48e51d83edea04526c0fd6e7519810ec624154c4a0252811c816 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See paragraph [250-10-S99-1](https://asc.understandingaccounting.org/asc/250/10/#250-10-S99-1), SAB Topic 1.M, for SEC Staff views regarding the assessment of materiality. ##### [250-10-S55-2](https://asc.understandingaccounting.org/asc/250/10/#250-10-S55-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:25.726Z to 2026-09-09T23:17:25.726Z Record version: sha256:57c96ce90952d734ffa420cde83c3fbeef2ae4ee54ab77ec8b77e860817620e8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See paragraph [250-10-S99-1](https://asc.understandingaccounting.org/asc/250/10/#250-10-S99-1), SAB Topic 1.M, for SEC Staff views regarding intentionally made immaterial misstatements. #### Accounting for Changes Not Retroactively Applied Due to Immateriality ##### [250-10-S55-3](https://asc.understandingaccounting.org/asc/250/10/#250-10-S55-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:25.726Z to 2026-09-09T23:17:25.726Z Record version: sha256:654353754d40616cbde3c3ea3082862b45a1eb37789681e3a20ad33b26334139 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See paragraph [250-10-S99-3](https://asc.understandingaccounting.org/asc/250/10/#250-10-S99-3), SAB Topic 5.F, for SEC Staff views regarding accounting for changes not retroactively applied due to immateriality. #### Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements ##### [250-10-S55-4](https://asc.understandingaccounting.org/asc/250/10/#250-10-S55-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:25.726Z to 2026-09-09T23:17:25.726Z Record version: sha256:52283798e06d52afda7cf869627411b20eb0f55e79eb6842068da44ebca0528e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See paragraph [250-10-S99-2](https://asc.understandingaccounting.org/asc/250/10/#250-10-S99-2), SAB Topic 1.N, for SEC Staff views regarding considering the effects of prior year misstatements when quantifying misstatements in the current year. #### Reporting Requirements for Accounting Changes ##### [250-10-S55-5](https://asc.understandingaccounting.org/asc/250/10/#250-10-S55-5) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:25.726Z to 2026-09-09T23:17:25.726Z Record version: sha256:83c8e4f0979598ce272261307a7c903ad9ab2fba31ac412d391b992c23289fa7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See paragraph [250-10-S99-4](https://asc.understandingaccounting.org/asc/250/10/#250-10-S99-4), SAB Topic 6.G.2.b.1, for SEC Staff views regarding preferability among accounting alternatives. ##### [250-10-S55-6](https://asc.understandingaccounting.org/asc/250/10/#250-10-S55-6) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:25.726Z to 2026-09-09T23:17:25.726Z Record version: sha256:aaf834440121ab3424a1e93d5ff0446c6362585e4430b0f8792563b296712b69 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See paragraph [250-10-S99-4](https://asc.understandingaccounting.org/asc/250/10/#250-10-S99-4), SAB Topic 6.G.2.b.2, for SEC Staff views regarding requirements to file an accountant's preferability letter. #### A Change by an Insurance Entity in Its Method of Selecting a Discount Rate Used to Discount Claims Liabilities Related to Short-Duration Contracts ##### [250-10-S55-7](https://asc.understandingaccounting.org/asc/250/10/#250-10-S55-7) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:25.726Z to 2026-09-09T23:17:25.726Z Record version: sha256:be66bb62e2a5b1640bbb27cb5db43e0d4ca7d1170850943a38894db290398043 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See paragraph [944-20-S99-1](https://asc.understandingaccounting.org/asc/944/20/#944-20-S99-1), SAB Topic 5.N, Question 2, for SEC Staff views regarding a change from a statutory rate to an investment related rate. Source downloaded (UTC): 2026-09-09T23:17:32.360Z to 2026-09-09T23:17:32.360Z Record version: sha256:89d4776c366075aae88df0de2fa2cf811a21beb0282081f9e9ba686fa2b6adb4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 250-10-S99: SEC 99 SEC Materials [Read section](https://asc.understandingaccounting.org/asc/250/10/#sec-99-sec-materials) SEC content: yes #### SEC Staff Guidance ##### [250-10-S99-1](https://asc.understandingaccounting.org/asc/250/10/#250-10-S99-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:32.360Z to 2026-09-09T23:17:32.360Z Record version: sha256:905e929cd36ac25c83bf99c6fc3ca425666f17af6c5e36660bb1f0e42490d1bd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following is the text of SAB Topic 1.M, Assessing Materiality. - 1\. Assessing materiality - Facts: During the course of preparing or auditing year-end financial statements, financial management or the registrant's independent auditor becomes aware of misstatements in a registrant's financial statements. When combined, the misstatements result in a 4% overstatement of net income and a $.02 (4%) overstatement of earnings per share. Because no item in the registrant's consolidated financial statements is misstated by more than 5%, management and the independent auditor conclude that the deviation from GAAP is immaterial and that the accounting is permissible. FN24 - FN24 AU 312 states that the auditor should consider audit risk and materiality both in (a) planning and setting the scope for the audit and (b) evaluating whether the financial statements taken as a whole are fairly presented in all material respects in conformity with GAAP. The purpose of this SAB is to provide guidance to financial management and independent auditors with respect to the evaluation of the materiality of misstatements that are identified in the audit process or preparation of the financial statements (i. e., (b) above). This SAB is not intended to provide definitive guidance for assessing "materiality" in other contexts, such as evaluations of auditor independence, as other factors may apply. There may be other rules that address financial presentation. See, e.g., Rule 2a-4, 17 CFR 270.2a-4, under the Investment Company Act of 1940. - Question: FASB ASC paragraph [105-10-05-6](https://asc.understandingaccounting.org/asc/105/10/#105-10-05-6) (Generally Accepted Accounting Principles Topic) states, "The provisions of the Codification need not be applied to immaterial items." In the staff's view, may a registrant or the auditor of its financial statements assume the immateriality of items that fall below a percentage threshold set by management or the auditor to determine whether amounts and items are material to the financial statements? - Interpretive Response: No. The staff is aware that certain registrants, over time, have developed quantitative thresholds as "rules of thumb" to assist in the preparation of their financial statements, and that auditors also have used these thresholds in their evaluation of whether items might be considered material to users of a registrant's financial statements. One rule of thumb in particular suggests that the misstatement or omission FN25 of an item that falls under a 5% threshold is not material in the absence of particularly egregious circumstances, such as self-dealing or misappropriation by senior management. The staff reminds registrants and the auditors of their financial statements that exclusive reliance on this or any percentage or numerical threshold has no basis in the accounting literature or the law. - FN25 As used in this SAB, "misstatement" or "omission" refers to a financial statement assertion that would not be in conformity with GAAP. - The use of a percentage as a numerical threshold, such as 5%, may provide the basis for a preliminary assumption that - without considering all relevant circumstances - a deviation of less than the specified percentage with respect to a particular item on the registrant's financial statements is unlikely to be material. The staff has no objection to such a "rule of thumb" as an initial step in assessing materiality. But quantifying, in percentage terms, the magnitude of a misstatement is only the beginning of an analysis of materiality; it cannot appropriately be used as a substitute for a full analysis of all relevant considerations. Materiality concerns the significance of an item to users of a registrant's financial statements. A matter is "material" if there is a substantial likelihood that a reasonable person would consider it important. In its Concepts Statement 2, Qualitative Characteristics of Accounting Information, the FASB stated the essence of the concept of materiality as follows: - The omission or misstatement of an item in a financial report is material if, in the light of surrounding circumstances, the magnitude of the item is such that it is probable that the judgment of a reasonable person relying upon the report would have been changed or influenced by the inclusion or correction of the item. FN26 - FN26 Concepts Statement 2, paragraph 132. See also Concepts Statement 2, Glossary of Terms - Materiality. - This formulation in the accounting literature is in substance identical to the formulation used by the courts in interpreting the federal securities laws. The Supreme Court has held that a fact is material if there is - - a substantial likelihood that the...fact would have been viewed by the reasonable investor as having significantly altered the "total mix" of information made available. FN27 - FN27 TSC Industries v. Northway, Inc., 426 U.S. 438, 449 (1976). See also Basic, Inc. v. Levinson, 485 U.S. 224 (1988). As the Supreme Court has noted, determinations of materiality require "delicate assessments of the inferences a \`reasonable shareholder' would draw from a given set of facts and the significance of those inferences to him...." TSC Industries, 426 U.S. at 450. - Under the governing principles, an assessment of materiality requires that one views the facts in the context of the "surrounding circumstances," as the accounting literature puts it, or the "total mix" of information, in the words of the Supreme Court. In the context of a misstatement of a financial statement item, while the "total mix" includes the size in numerical or percentage terms of the misstatement, it also includes the factual context in which the user of financial statements would view the financial statement item. The shorthand in the accounting and auditing literature for this analysis is that financial management and the auditor must consider both "quantitative" and "qualitative" factors in assessing an item's materiality. FN28 Court decisions, Commission rules and enforcement actions, and accounting and auditing literature FN29 have all considered "qualitative" factors in various contexts. - FN28 See, e.g., Concepts Statement 2, paragraphs 123-124; AU 312A.10 (materiality judgments are made in light of surrounding circumstances and necessarily involve both quantitative and qualitative considerations); AU 312A.34 ("Qualitative considerations also influence the auditor in reaching a conclusion as to whether misstatements are material."). As used in the accounting literature and in this SAB, "qualitative" materiality refers to the surrounding circumstances that inform an investor's evaluation of financial statement entries. Whether events may be material to investors for non-financial reasons is a matter not addressed by this SAB. - FN29 See, e.g., Rule 1-02(o) of Regulation S-X, 17 CFR 210.1-02(o), Rule 405 of Regulation C, 17 CFR 230.405, and Rule 12b-2, 17 CFR 240.12b-2; AU 312A.10 -.11, 317.13, 411.04 n. 1, and 508.36; In re Kidder Peabody Securities Litigation, 10 F. Supp. 2d 398 (S.D.N.Y. 1998); Parnes v. Gateway 2000, Inc., 122 F.3d 539 (8th Cir. 1997); In re Westinghouse Securities Litigation, 90 F.3d 696 (3d Cir. 1996); In the Matter of W.R. Grace & Co., Accounting and Auditing Enforcement Release ("AAER") 1140 (June 30, 1999); In the Matter of Eugene Gaughan, AAER 1141 (June 30, 1999); In the Matter of Thomas Scanlon, AAER 1142 (June 30, 1999); and In re Sensormatic Electronics Corporation, Sec. Act Rel. No. 7518 (March 25, 1998). - The FASB has long emphasized that materiality cannot be reduced to a numerical formula. In its Concepts Statement 2, the FASB noted that some had urged it to promulgate quantitative materiality guides for use in a variety of situations. The FASB rejected such an approach as representing only a "minority view, stating - - The predominant view is that materiality judgments can properly be made only by those who have all the facts. The Board's present position is that no general standards of materiality could be formulated to take into account all the considerations that enter into an experienced human judgment. FN30 - FN30 Concepts Statement 2, paragraph 131. - The FASB noted that, in certain limited circumstances, the Commission and other authoritative bodies had issued quantitative materiality guidance, citing as examples guidelines ranging from one to ten percent with respect to a variety of disclosures. FN31 And it took account of contradictory studies, one showing a lack of uniformity among auditors on materiality judgments, and another suggesting widespread use of a "rule of thumb" of five to ten percent of net income. FN32 The FASB also considered whether an evaluation of materiality could be based solely on anticipating the market's reaction to accounting information. FN33 - FN31 Concepts Statement 2, paragraphs 131 and 166. - FN32 Concepts Statement 2, paragraph 167. - FN33 Concepts Statement 2, paragraphs 168-169. - The FASB rejected a formulaic approach to discharging "the onerous duty of making materiality decisions" FN34 in favor of an approach that takes into account all the relevant considerations. In so doing, it made clear that - - FN34 Concepts Statement 2, paragraph 170. - \[M\]agnitude by itself, without regard to the nature of the item and the circumstances in which the judgment has to be made, will not generally be a sufficient basis for a materiality judgment. FN35 - FN35 Concepts Statement 2, paragraph 125. - Evaluation of materiality requires a registrant and its auditor to consider all the relevant circumstances, and the staff believes that there are numerous circumstances in which misstatements below 5% could well be material. Qualitative factors may cause misstatements of quantitatively small amounts to be material; as stated in the auditing literature: - As a result of the interaction of quantitative and qualitative considerations in materiality judgments, misstatements of relatively small amounts that come to the auditor's attention could have a material effect on the financial statements. FN36 - FN36 AU 312.11. - Among the considerations that may well render material a quantitatively small misstatement of a financial statement item are - - whether the misstatement arises from an item capable of precise measurement or whether it arises from an estimate and, if so, the degree of imprecision inherent in the estimate FN37. - FN37 As stated in Concepts Statement 2, paragraph 130: Another factor in materiality judgments is the degree of precision that is attainable in estimating the judgment item. The amount of deviation that is considered immaterial may increase as the attainable degree of precision decreases. For example, accounts payable usually can be estimated more accurately than can contingent liabilities arising from litigation or threats of it, and a deviation considered to be material in the first case may be quite trivial in the second. This SAB is not intended to change current law or guidance in the accounting literature regarding accounting estimates. See, e.g., Accounting Principles Board Opinion 20, Accounting Changes 10, 11, 31-33 (July 1971) \[Subtopic 250-10\]. - whether the misstatement masks a change in earnings or other trends. - whether the misstatement hides a failure to meet analysts' consensus expectations for the enterprise. - whether the misstatement changes a loss into income or vice versa. - whether the misstatement concerns a segment or other portion of the registrant's business that has been identified as playing a significant role in the registrant's operations or profitability. - whether the misstatement affects the registrant's compliance with regulatory requirements. - whether the misstatement affects the registrant's compliance with loan covenants or other contractual requirements. - whether the misstatement has the effect of increasing management's compensation - for example, by satisfying requirements for the award of bonuses or other forms of incentive compensation. - whether the misstatement involves concealment of an unlawful transaction. - This is not an exhaustive list of the circumstances that may affect the materiality of a quantitatively small misstatement. FN38 Among other factors, the demonstrated volatility of the price of a registrant's securities in response to certain types of disclosures may provide guidance as to whether investors regard quantitatively small misstatements as material. Consideration of potential market reaction to disclosure of a misstatement is by itself "too blunt an instrument to be depended on" in considering whether a fact is material. FN39 When, however, management or the independent auditor expects (based, for example, on a pattern of market performance) that a known misstatement may result in a significant positive or negative market reaction, that expected reaction should be taken into account when considering whether a misstatement is material. FN40 - FN38 The staff understands that the Big Five Audit Materiality Task Force ("Task Force") was convened in March of 1998 and has made recommendations to the Auditing Standards Board including suggestions regarding communications with audit committees about unadjusted misstatements. See generally Big Five Audit Materiality Task Force. "Materiality in a Financial Statement Audit - Considering Qualitative Factors When Evaluating Audit Findings" (August 1998). - FN39 See Concepts Statement 2, paragraph 169. - FN40 If management does not expect a significant market reaction, a misstatement still may be material and should be evaluated under the criteria discussed in this SAB. - For the reasons noted above, the staff believes that a registrant and the auditors of its financial statements should not assume that even small intentional misstatements in financial statements, for example those pursuant to actions to "manage" earnings, are immaterial. FN41 While the intent of management does not render a misstatement material, it may provide significant evidence of materiality. The evidence may be particularly compelling where management has intentionally misstated items in the financial statements to "manage" reported earnings. In that instance, it presumably has done so believing that the resulting amounts and trends would be significant to users of the registrant's financial statements. FN42 The staff believes that investors generally would regard as significant a management practice to over- or under-state earnings up to an amount just short of a percentage threshold in order to "manage" earnings. Investors presumably also would regard as significant an accounting practice that, in essence, rendered all earnings figures subject to a management-directed margin of misstatement. - FN41 Intentional management of earnings and intentional misstatements, as used in this SAB, do not include insignificant errors and omissions that may occur in systems and recurring processes in the normal course of business. See notes 37 and 49 infra. - FN42 Assessments of materiality should occur not only at year-end, but also during the preparation of each quarterly or interim financial statement. See, e.g., In the Matter of Venator Group, Inc., AAER 1049 (June 29, 1998). - The materiality of a misstatement may turn on where it appears in the financial statements. For example, a misstatement may involve a segment of the registrant's operations. In that instance, in assessing materiality of a misstatement to the financial statements taken as a whole, registrants and their auditors should consider not only the size of the misstatement but also the significance of the segment information to the financial statements taken as a whole. FN43 "A misstatement of the revenue and operating profit of a relatively small segment that is represented by management to be important to the future profitability of the entity" FN44 is more likely to be material to investors than a misstatement in a segment that management has not identified as especially important. In assessing the materiality of misstatements in segment information - as with materiality generally - - FN43 See, e.g., In the Matter of W.R. Grace & Co., AAER 1140 (June 30, 1999). - FN44 AU 9326.33. - situations may arise in practice where the auditor will conclude that a matter relating to segment information is qualitatively material even though, in his or her judgment, it is quantitatively immaterial to the financial statements taken as a whole. FN45 - FN45 Id. - Aggregating and Netting Misstatements. - In determining whether multiple misstatements cause the financial statements to be materially misstated, registrants and the auditors of their financial statements should consider each misstatement separately and the aggregate effect of all misstatements. FN46 A registrant and its auditor should evaluate misstatements in light of quantitative and qualitative factors and "consider whether, in relation to individual amounts, subtotals, or totals in the financial statements, they materially misstate the financial statements taken as a whole." FN47 This requires consideration of - - FN46 The auditing literature notes that the "concept of materiality recognizes that some matters, either individually or in the aggregate, are important for fair presentation of financial statements in conformity with generally accepted accounting principles." AU 312.03. See also AU 312.04. - FN47 AU 312.34. Quantitative materiality assessments often are made by comparing adjustments to revenues, gross profit, pretax and net income, total assets, stockholders' equity, or individual line items in the financial statements. The particular items in the financial statements to be considered as a basis for the materiality determination depend on the proposed adjustment to be made and other factors, such as those identified in this SAB. For example, an adjustment to inventory that is immaterial to pretax income or net income may be material to the financial statements because it may affect a working capital ratio or cause the registrant to be in default of loan covenants. - the significance of an item to a particular entity (for example, inventories to a manufacturing company), the pervasiveness of the misstatement (such as whether it affects the presentation of numerous financial statement items), and the effect of the misstatement on the financial statements taken as a whole.... FN48 - FN48 AU 508.36. - Registrants and their auditors first should consider whether each misstatement is material, irrespective of its effect when combined with other misstatements. The literature notes that the analysis should consider whether the misstatement of "individual amounts" causes a material misstatement of the financial statements taken as a whole. As with materiality generally, this analysis requires consideration of both quantitative and qualitative factors. - If the misstatement of an individual amount causes the financial statements as a whole to be materially misstated, that effect cannot be eliminated by other misstatements whose effect may be to diminish the impact of the misstatement on other financial statement items. To take an obvious example, if a registrant's revenues are a material financial statement item and if they are materially overstated, the financial statements taken as a whole will be materially misleading even if the effect on earnings is completely offset by an equivalent overstatement of expenses. - Even though a misstatement of an individual amount may not cause the financial statements taken as a whole to be materially misstated, it may nonetheless, when aggregated with other misstatements, render the financial statements taken as a whole to be materially misleading. Registrants and the auditors of their financial statements accordingly should consider the effect of the misstatement on subtotals or totals. The auditor should aggregate all misstatements that affect each subtotal or total and consider whether the misstatements in the aggregate affect the subtotal or total in a way that causes the registrant's financial statements taken as a whole to be materially misleading. FN49 - FN49 AU 312.34. - The staff believes that, in considering the aggregate effect of multiple misstatements on a subtotal or total, registrants and the auditors of their financial statements should exercise particular care when considering whether to offset (or the appropriateness of offsetting) a misstatement of an estimated amount with a misstatement of an item capable of precise measurement. As noted above, assessments of materiality should never be purely mechanical; given the imprecision inherent in estimates, there is by definition a corresponding imprecision in the aggregation of misstatements involving estimates with those that do not involve an estimate. - Registrants and auditors also should consider the effect of misstatements from prior periods on the current financial statements. For example, the auditing literature states, - Matters underlying adjustments proposed by the auditor but not recorded by the entity could potentially cause future financial statements to be materially misstated, even though the auditor has concluded that the adjustments are not material to the current financial statements. FN50 - FN50 AU 380.09. - This may be particularly the case where immaterial misstatements recur in several years and the cumulative effect becomes material in the current year. - 2\. Immaterial Misstatements that are Intentional - Facts: A registrant's management intentionally has made adjustments to various financial statement items in a manner inconsistent with GAAP. In each accounting period in which such actions were taken, none of the individual adjustments is by itself material, nor is the aggregate effect on the financial statements taken as a whole material for the period. The registrant's earnings "management" has been effected at the direction or acquiescence of management in the belief that any deviations from GAAP have been immaterial and that accordingly the accounting is permissible. - Question: In the staff's view, may a registrant make intentional immaterial misstatements in its financial statements? - Interpretive Response: No. In certain circumstances, intentional immaterial misstatements are unlawful. - Considerations of the books and records provisions under the Exchange Act. - Even if misstatements are immaterial, FN51 registrants must comply with Sections 13(b)(2) - (7) of the Securities Exchange Act of 1934 (the "Exchange Act"). FN52 Under these provisions, each registrant with securities registered pursuant to Section 12 of the Exchange Act, FN53 or required to file reports pursuant to Section 15(d), FN54 must make and keep books, records, and accounts, which, in reasonable detail, accurately and fairly reflect the transactions and dispositions of assets of the registrant and must maintain internal accounting controls that are sufficient to provide reasonable assurances that, among other things, transactions are recorded as necessary to permit the preparation of financial statements in conformity with GAAP. FN55 In this context, determinations of what constitutes "reasonable assurance" and "reasonable detail" are based not on a "materiality" analysis but on the level of detail and degree of assurance that would satisfy prudent officials in the conduct of their own affairs. FN56 Accordingly, failure to record accurately immaterial items, in some instances, may result in violations of the securities laws. - FN51 FASB ASC paragraph [105-10-05-6](https://asc.understandingaccounting.org/asc/105/10/#105-10-05-6) states that "\[t\]he provisions of the Codification need not be applied to immaterial items." This SAB is consistent with that provision of the Codification. In theory, this language is subject to the interpretation that the registrant is free intentionally to set forth immaterial items in financial statements in a manner that plainly would be contrary to GAAP if the misstatement were material. The staff believes that the FASB did not intend this result. - FN52 15 U.S.C. 78m(b)(2) - (7). - FN53 15 U.S.C. 78l. - FN54 15 U.S.C. 78o(d). - FN55 Criminal liability may be imposed if a person knowingly circumvents or knowingly fails to implement a system of internal accounting controls or knowingly falsifies books, records or accounts. 15 U.S.C. 78m(4) and (5). See also Rule 13b2-1 under the Exchange Act, 17 CFR 240.13b2-1, which states, "No person shall, directly or indirectly, falsify or cause to be falsified, any book, record or account subject to Section 13(b)(2)(A) of the Securities Exchange Act." - FN56 15 U.S.C. 78m(b)(7). The books and records provisions of section 13(b) of the Exchange Act originally were passed as part of the Foreign Corrupt Practices Act ("FCPA"). In the conference committee report regarding the 1988 amendments to the FCPA, the committee stated: The conference committee adopted the prudent man qualification in order to clarify that the current standard does not connote an unrealistic degree of exactitude or precision. The concept of reasonableness of necessity contemplates the weighing of a number of relevant factors, including the costs of compliance. Cong. Rec. H2116 (daily ed. April 20, 1988). - The staff recognizes that there is limited authoritative guidance FN57 regarding the "reasonableness" standard in Section 13(b)(2) of the Exchange Act. A principal statement of the Commission's policy in this area is set forth in an address given in 1981 by then Chairman Harold M. Williams. FN58 In his address, Chairman Williams noted that, like materiality, "reasonableness" is not an "absolute standard of exactitude for corporate records." FN59 Unlike materiality, however, "reasonableness" is not solely a measure of the significance of a financial statement item to investors. "Reasonableness," in this context, reflects a judgment as to whether an issuer's failure to correct a known misstatement implicates the purposes underlying the accounting provisions of Sections 13(b)(2) - (7) of the Exchange Act. FN60 - FN57 So far as the staff is aware, there is only one judicial decision that discusses Section 13(b)(2) of the Exchange Act in any detail, SEC v. World-Wide Coin Investments, Ltd., 567 F. Supp. 724 (N.D. Ga. 1983), and the courts generally have found that no private right of action exists under the accounting and books and records provisions of the Exchange Act. See e.g., Lamb v. Phillip Morris Inc., 915 F.2d 1024 (6th Cir. 1990) and JS Service Center Corporation v. General Electric Technical Services Company, 937 F. Supp. 216 (S.D.N.Y. 1996). - FN58 The Commission adopted the address as a formal statement of policy in Securities Exchange Act Release No. 17500 (January 29, 1981), 46 FR 11544 (February 9, 1981), 21 SEC Docket 1466 (February 10, 1981). - FN59 Id. at 46 FR 11546. - FN60 Id. - In assessing whether a misstatement results in a violation of a registrant's obligation to keep books and records that are accurate "in reasonable detail," registrants and their auditors should consider, in addition to the factors discussed above concerning an evaluation of a misstatement's potential materiality, the factors set forth below. - The significance of the misstatement. Though the staff does not believe that registrants need to make finely calibrated determinations of significance with respect to immaterial items, plainly it is "reasonable" to treat misstatements whose effects are clearly inconsequential differently than more significant ones. - How the misstatement arose. It is unlikely that it is ever "reasonable" for registrants to record misstatements or not to correct known misstatements - even immaterial ones - as part of an ongoing effort directed by or known to senior management for the purposes of "managing" earnings. On the other hand, insignificant misstatements that arise from the operation of systems or recurring processes in the normal course of business generally will not cause a registrant's books to be inaccurate "in reasonable detail." FN61 - FN61 For example, the conference report regarding the 1988 amendments to the FCPA stated: The Conferees intend to codify current Securities and Exchange Commission (SEC) enforcement policy that penalties not be imposed for insignificant or technical infractions or inadvertent conduct. The amendment adopted by the Conferees \[Section 13(b)(4)\] accomplishes this by providing that criminal penalties shall not be imposed for failing to comply with the FCPA's books and records or accounting provisions. This provision \[Section 13(b)(5)\] is meant to ensure that criminal penalties would be imposed where acts of commission or omission in keeping books or records or administering accounting controls have the purpose of falsifying books, records or accounts, or of circumventing the accounting controls set forth in the Act. This would include the deliberate falsification of books and records and other conduct calculated to evade the internal accounting controls requirement. Cong. Rec. H2115 (daily ed. April 20, 1988). - The cost of correcting the misstatement. The books and records provisions of the Exchange Act do not require registrants to make major expenditures to correct small misstatements. FN62 Conversely, where there is little cost or delay involved in correcting a misstatement, failing to do so is unlikely to be "reasonable." - FN62 As Chairman Williams noted with respect to the internal control provisions of the FCPA, "\[t\]housands of dollars ordinarily should not be spent conserving hundreds." 46 FR 11546. - The clarity of authoritative accounting guidance with respect to the misstatement. Where reasonable minds may differ about the appropriate accounting treatment of a financial statement item, a failure to correct it may not render the registrant's financial statements inaccurate "in reasonable detail." Where, however, there is little ground for reasonable disagreement, the case for leaving a misstatement uncorrected is correspondingly weaker. - There may be other indicators of "reasonableness" that registrants and their auditors may ordinarily consider. Because the judgment is not mechanical, the staff will be inclined to continue to defer to judgments that "allow a business, acting in good faith, to comply with the Act's accounting provisions in an innovative and cost-effective way." FN63 - FN63 Id., at 11547. - The Auditor's Response to Intentional Misstatements. - Section 10A(b) of the Exchange Act requires auditors to take certain actions upon discovery of an "illegal act." FN64 The statute specifies that these obligations are triggered "whether or not \[the illegal acts are\] perceived to have a material effect on the financial statements of the issuer...." Among other things, Section 10A(b)(1) requires the auditor to inform the appropriate level of management of an illegal act (unless clearly inconsequential) and assure that the registrant's audit committee is "adequately informed" with respect to the illegal act. - FN64 Section 10A(f) defines, for purposes of Section 10A, an "illegal act" as "an act or omission that violates any law, or any rule or regulation having the force of law." This is broader than the definition of an "illegal act" in AU 317.02, which states, "Illegal acts by clients do not include personal misconduct by the entity's personnel unrelated to their business activities.". - As noted, an intentional misstatement of immaterial items in a registrant's financial statements may violate Section 13(b)(2) of the Exchange Act and thus be an illegal act. When such a violation occurs, an auditor must take steps to see that the registrant's audit committee is "adequately informed" about the illegal act. Because Section 10A(b)(1) is triggered regardless of whether an illegal act has a material effect on the registrant's financial statements, where the illegal act consists of a misstatement in the registrant's financial statements, the auditor will be required to report that illegal act to the audit committee irrespective of any "netting" of the misstatements with other financial statement items. - The requirements of Section 10A echo the auditing literature. See, e.g. Statement on Auditing Standards (SAS) Nos. 54 and 99. Pursuant to paragraph 77 of SAS 99, if the auditor determines there is evidence that fraud may exist, the auditor must discuss the matter with the appropriate level of management that is at least one level above those involved, and with senior management and the audit committee. The auditor must report directly to the audit committee fraud involving senior management and fraud that causes a material misstatement of the financial statements. Paragraph 6 of SAS 99 states that "misstatements arising from fraudulent financial reporting are intentional misstatements or omissions of amounts or disclosures in financial statements designed to deceive financial statement users..." FN65 SAS 99 further states that fraudulent financial reporting may involve falsification or alteration of accounting records; misrepresenting or omitting events, transactions or other information in the financial statements; and the intentional misapplication of accounting principles relating to amounts, classifications, the manner of presentation, or disclosures in the financial statements. FN66 The clear implication of SAS 99 is that immaterial misstatements may be fraudulent financial reporting. FN67 - FN65 An unintentional illegal act triggers the same procedures and considerations by the auditor as a fraudulent misstatement if the illegal act has a direct and material effect on the financial statements. See AU 110 n. 1, 317.05 and 317.07. Although distinguishing between intentional and unintentional misstatements is often difficult, the auditor must plan and perform the audit to obtain reasonable assurance that the financial statements are free of material misstatements in either case. - FN66 Although the auditor is not required to plan or perform the audit to detect misstatements that are immaterial to the financial statements, SAS 99 requires the auditor to evaluate several fraud "risk factors" that may bring such misstatements to his or her attention. For example, an analysis of fraud risk factors under SAS 99 must include, among other things, consideration of management's interest in maintaining or increasing the registrant's stock price or earnings trend through the use of unusually aggressive accounting practices, whether management has a practice of committing to analysts or others that it will achieve unduly aggressive or clearly unrealistic forecasts, and the existence of assets, liabilities, revenues, or expenses based on significant estimates that involve unusually subjective judgments or uncertainties. - FN67 In requiring the auditor to consider whether fraudulent misstatements are material, and in requiring differing responses depending on whether the misstatement is material, SAS 99 makes clear that fraud can involve immaterial misstatements. Indeed, a misstatement can be "inconsequential" and still involve fraud. Under SAS 99, assessing whether misstatements due to fraud are material to the financial statements is a "cumulative process" that should occur both during and at the completion of the audit. SAS 99 further states that this accumulation is primarily a "qualitative matter" based on the auditor's judgment. The staff believes that in making these assessments, management and auditors should refer to the discussion in Part 1 of this SAB. - Auditors that learn of intentional misstatements may also be required to (1) re-evaluate the degree of audit risk involved in the audit engagement, (2) determine whether to revise the nature, timing, and extent of audit procedures accordingly, and (3) consider whether to resign. FN68 - FN68 Auditors should document their determinations in accordance with SAS 96, SAS 99, and other appropriate sections of the audit literature. - Intentional misstatements also may signal the existence of reportable conditions or material weaknesses in the registrant's system of internal accounting control designed to detect and deter improper accounting and financial reporting. FN69 As stated by the National Commission on Fraudulent Financial Reporting, also known as the Treadway Commission, in its 1987 report, - FN69 See, e.g., SAS 99. - The tone set by top management—the corporate environment or culture within which financial reporting occurs - is the most important factor contributing to the integrity of the financial reporting process. Notwithstanding an impressive set of written rules and procedures, if the tone set by management is lax, fraudulent financial reporting is more likely to occur. FN70 - FN70 Report of the National Commission on Fraudulent Financial Reporting at 32 (October 1987). See also Report and Recommendations of the Blue Ribbon Committee on Improving the Effectiveness of Corporate Audit Committees (February 8, 1999). - An auditor is required to report to a registrant's audit committee any reportable conditions or material weaknesses in a registrant's system of internal accounting control that the auditor discovers in the course of the examination of the registrant's financial statements. FN71 - FN71 AU 325.02. See also AU 380.09, which, in discussing matters to be communicated by the auditor to the audit committee, states: The auditor should inform the audit committee about adjustments arising from the audit that could, in his judgment, either individually or in the aggregate, have a significant effect on the entity's financial reporting process. For purposes of this section, an audit adjustment, whether or not recorded by the entity, is a proposed correction of the financial statements. - GAAP precedence over industry practice. - Some have argued to the staff that registrants should be permitted to follow an industry accounting practice even though that practice is inconsistent with authoritative accounting literature. This situation might occur if a practice is developed when there are few transactions and the accounting results are clearly inconsequential, and that practice never changes despite a subsequent growth in the number or materiality of such transactions. The staff disagrees with this argument. Authoritative literature takes precedence over industry practice that is contrary to GAAP. FN72 - FN72 See AU 411.05. - General comments. - This SAB is not intended to change current law or guidance in the accounting or auditing literature. FN73 This SAB and the authoritative accounting literature cannot specifically address all of the novel and complex business transactions and events that may occur. Accordingly, registrants may account for, and make disclosures about, these transactions and events based on analogies to similar situations or other factors. The staff may not, however, always be persuaded that a registrant's determination is the most appropriate under the circumstances. When disagreements occur after a transaction or an event has been reported, the consequences may be severe for registrants, auditors, and, most importantly, the users of financial statements who have a right to expect consistent accounting and reporting for, and disclosure of, similar transactions and events. The staff, therefore, encourages registrants and auditors to discuss on a timely basis with the staff proposed accounting treatments for, or disclosures about, transactions or events that are not specifically covered by the existing accounting literature. - FN73 The FASB Discussion Memorandum, "Criteria for Determining Materiality," states that the financial accounting and reporting process considers that "a great deal of the time might be spent during the accounting process considering insignificant matters.... If presentations of financial information are to be prepared economically on a timely basis and presented in a concise intelligible form, the concept of materiality is crucial." This SAB is not intended to require that misstatements arising from insignificant errors and omissions (individually and in the aggregate) arising from the normal recurring accounting close processes, such as a clerical error or an adjustment for a missed accounts payable invoice, always be corrected, even if the error is identified in the audit process and known to management. Management and the auditor would need to consider the various factors described elsewhere in this SAB in assessing whether such misstatements are material, need to be corrected to comply with the FCPA, or trigger procedures under Section 10A of the Exchange Act. Because this SAB does not change current law or guidance in the accounting or auditing literature, adherence to the principles described in this SAB should not raise the costs associated with recordkeeping or with audits of financial statements. ##### [250-10-S99-2](https://asc.understandingaccounting.org/asc/250/10/#250-10-S99-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:32.360Z to 2026-09-09T23:17:32.360Z Record version: sha256:e85cee5e0d34baf174ca4dd69b90f6be5382a1f3533b40ef4f35f2fcf373e47b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following is the text of SAB Topic 1.N, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements. - (Added by SAB 108). - Facts: During the course of preparing annual financial statements, a registrant is evaluating the materiality of an improper expense accrual (e. g., overstated liability) in the amount of $100, which has built up over 5 years, at $20 per year. FN74 The registrant previously evaluated the misstatement as being immaterial to each of the prior year financial statements (i. e., years 1-4). For the purpose of evaluating materiality in the current year (i. e., year 5), the registrant quantifies the error as a $20 overstatement of expenses. - FN74 For purposes of these facts, assume the registrant properly determined that the overstatement of the liability resulted from an error rather than a change in accounting estimate. See the FASB ASC Master Glossary for the distinction between an error and a change in accounting estimate. - Question 1: Has the registrant appropriately quantified the amount of this error for the purpose of evaluating materiality for the current year? - Interpretive Response: No. In this example, the registrant has only quantified the effects of the identified unadjusted error that arose in the current year income statement. The staff believes a registrants materiality evaluation of an identified unadjusted error should quantify the effects of the identified unadjusted error on each financial statement and related financial statement disclosure. - Topic 1M notes that a materiality evaluation must be based on all relevant quantitative and qualitative factors. FN75 This analysis generally begins with quantifying potential misstatements to be evaluated. There has been diversity in practice with respect to this initial step of a materiality analysis. - FN75 Topic 1N addresses certain of these quantitative issues, but does not alter the analysis required by Topic 1M. - The diversity in approaches for quantifying the amount of misstatements primarily stems from the effects of misstatements that were not corrected at the end of the prior year (prior year misstatements). These prior year misstatements should be considered in quantifying misstatements in current year financial statements. - The techniques most commonly used in practice to accumulate and quantify misstatements are generally referred to as the rollover and iron curtain approaches. - The rollover approach, which is the approach used by the registrant in this example, quantifies a misstatement based on the amount of the error originating in the current year income statement. Thus, this approach ignores the effects of correcting the portion of the current year balance sheet misstatement that originated in prior years (i. e., it ignores the carryover effects of prior year misstatements). - The iron curtain approach quantifies a misstatement based on the effects of correcting the misstatement existing in the balance sheet at the end of the current year, irrespective of the misstatements year(s) of origination. Had the registrant in this fact pattern applied the iron curtain approach, the misstatement would have been quantified as a $100 misstatement based on the end of year balance sheet misstatement. Thus, the adjustment needed to correct the financial statements for the end of year error would be to reduce the liability by $100 with a corresponding decrease in current year expense. - As demonstrated in this example, the primary weakness of the rollover approach is that it can result in the accumulation of significant misstatements on the balance sheet that are deemed immaterial in part because the amount that originates in each year is quantitatively small. The staff is aware of situations in which a registrant, relying on the rollover approach, has allowed an erroneous item to accumulate on the balance sheet to the point where eliminating the improper asset or liability would itself result in a material error in the income statement if adjusted in the current year. Such registrants have sometimes concluded that the improper asset or liability should remain on the balance sheet into perpetuity. - In contrast, the primary weakness of the iron curtain approach is that it does not consider the correction of prior year misstatements in the current year (i. e., the reversal of the carryover effects) to be errors. Therefore, in this example, if the misstatement was corrected during the current year such that no error existed in the balance sheet at the end of the current year, the reversal of the $80 prior year misstatement would not be considered an error in the current year financial statements under the iron curtain approach. Implicitly, the iron curtain approach assumes that because the prior year financial statements were not materially misstated, correcting any immaterial errors that existed in those statements in the current year is the correct accounting, and is therefore not considered an error in the current year. Thus, utilization of the iron curtain approach can result in a misstatement in the current year income statement not being evaluated as an error at all. - The staff does not believe the exclusive reliance on either the rollover or iron curtain approach appropriately quantifies all misstatements that could be material to users of financial statements. - In describing the concept of materiality, Concepts Statement 2, Qualitative Characteristics of Accounting Information, indicates that materiality determinations are based on whether it is probable that the judgment of a reasonable person relying upon the report would have been changed or influenced _by the inclusion or correction of the item_ (emphasis added). FN76 The staff believes registrants must quantify the impact of correcting all misstatements, including both the carryover and reversing effects of prior year misstatements, on the current year financial statements. The staff believes that this can be accomplished by quantifying an error under both the rollover and iron curtain approaches as described above and by evaluating the error measured under each approach. Thus, a registrants financial statements would require adjustment when either approach results in quantifying a misstatement that is material, after considering all relevant quantitative and qualitative factors. - FN76 Concepts Statement 2, paragraph 132. See also Concepts Statement 2, Glossary of Terms - Materiality. - As a reminder, a change from an accounting principle that is not generally accepted to one that is generally accepted is a correction of an error. FN77 - FN77 See definition of “error in previously issued financial statements” in the FASB ASC Master Glossary. - The staff believes that the registrant should quantify the current year misstatement in this example using both the iron curtain approach (i. e., $100) and the rollover approach (i. e., $20). Therefore, if the $100 misstatement is considered material to the financial statements, after all of the relevant quantitative and qualitative factors are considered, the registrants financial statements would need to be adjusted. - It is possible that correcting an error in the current year could materially misstate the current years income statement. For example, correcting the $100 misstatement in the current year will: - Correct the $20 error originating in the current year; - Correct the $80 balance sheet carryover error that originated in Years 1 through 4; but also - Misstate the current year income statement by $80. - If the $80 understatement of current year expense is material to the current year, after all of the relevant quantitative and qualitative factors are considered, the prior year financial statements should be corrected, even though such revision previously was and continues to be immaterial to the prior year financial statements. Correcting prior year financial statements for immaterial errors would not require previously filed reports to be amended. Such correction may be made the next time the registrant files the prior year financial statements. - The following example further illustrates the staff's views on quantifying misstatements, including the consideration of the effects of prior year misstatements: - Facts: During the course of preparing annual financial statements, a registrant is evaluating the materiality of a sales cut-off error in which $50 of revenue from the following year was recorded in the current year, thereby overstating accounts receivable by $50 at the end of the current year. In addition, a similar sales cut-off error existed at the end of the prior year in which $110 of revenue from the current year was recorded in the prior year. As a result of the combination of the current year and prior year cut-off errors, revenues in the current year are understated by $60 ($110 understatement of revenues at the beginning of the current year partially offset by a $50 overstatement of revenues at the end of the current year). The prior year error was evaluated in the prior year as being immaterial to those financial statements. - Question 2: How should the registrant quantify the misstatement in the current year financial statements? - Interpretive Response: The staff believes the registrant should quantify the current year misstatement in this example using both the iron curtain approach (i. e., $50) and the rollover approach (i. e., $60). Therefore, assuming a $60 misstatement is considered material to the financial statements, after all relevant quantitative and qualitative factors are considered, the registrants financial statements would need to be adjusted. - Further, in this example, recording an adjustment in the current year could alter the amount of the error affecting the current year financial statements. For instance: - If only the $60 understatement of revenues were to be corrected in the current year, then the overstatement of current year end accounts receivable would increase to $110; or, - If only the $50 overstatement of accounts receivable were to be corrected in the current year, then the understatement of current year revenues would increase to $110. - If the misstatement that exists after recording the adjustment in the current year financial statements is material (considering all relevant quantitative and qualitative factors), the prior year financial statements should be corrected, even though such revision previously was and continues to be immaterial to the prior year financial statements. Correcting prior year financial statements for immaterial errors would not require previously filed reports to be amended. Such correction may be made the next time the registrant files the prior year financial statements. - If the cut-off error that existed in the prior year was not discovered until the current year, a separate analysis of the financial statements of the prior year (and any other prior year in which previously undiscovered errors existed) would need to be performed to determine whether such prior year financial statements were materially misstated. If that analysis indicates that the prior year financial statements are materially misstated, they would need to be restated in accordance with FASB ASC Topic 250, Accounting Changes and Error Corrections. FN78 - FN78 FASB ASC paragraph [250-10-45-23](https://asc.understandingaccounting.org/asc/250/10/#250-10-45-23). - Facts: When preparing its financial statements for years ending on or before November 15, 2006, a registrant quantified errors by using either the iron curtain approach or the rollover approach, but not both. Based on consideration of the guidance in this Staff Accounting Bulletin, the registrant concludes that errors existing in previously issued financial statements are material. - Question 3: Will the staff expect the registrant to restate prior period financial statements when first applying this guidance? - Interpretive Response: The staff will not object if a registrant FN79 does not restate financial statements for fiscal years ending on or before November 15, 2006, if management properly applied its previous approach, either iron curtain or rollover, so long as all relevant qualitative factors were considered. - FN79 If a registrants initial registration statement is not effective on or before November 15, 2006, and the registrants prior year(s) financial statements are materially misstated based on consideration of the guidance in this Staff Accounting Bulletin, the prior year financial statements should be restated in accordance with FASB ASC paragraph [250-10-45-23](https://asc.understandingaccounting.org/asc/250/10/#250-10-45-23). If a registrants initial registration statement is effective on or before November 15, 2006, the guidance in the interpretive response to Question 3 is applicable. - To provide full disclosure, registrants electing not to restate prior periods should reflect the effects of initially applying the guidance in Topic 1N in their annual financial statements covering the first fiscal year ending after November 15, 2006. The cumulative effect of the initial application should be reported in the carrying amounts of assets and liabilities as of the beginning of that fiscal year, and the offsetting adjustment should be made to the opening balance of retained earnings for that year. Registrants should disclose the nature and amount of each individual error being corrected in the cumulative adjustment. The disclosure should also include when and how each error being corrected arose and the fact that the errors had previously been considered immaterial. - Early application of the guidance in Topic 1N is encouraged in any report for an interim period of the first fiscal year ending after November 15, 2006, filed after the publication of this Staff Accounting Bulletin. In the event that the cumulative effect of application of the guidance in Topic 1N is first reported in an interim period other than the first interim period of the first fiscal year ending after November 15, 2006, previously filed interim reports need not be amended. However, comparative information presented in reports for interim periods of the first year subsequent to initial application should be adjusted to reflect the cumulative effect adjustment as of the beginning of the year of initial application. In addition, the disclosures of selected quarterly information required by Item 302 of Regulation S-K should reflect the adjusted results. ##### [250-10-S99-3](https://asc.understandingaccounting.org/asc/250/10/#250-10-S99-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:32.360Z to 2026-09-09T23:17:32.360Z Record version: sha256:f48795d2fd508665336ccf889768837e337f410f38c4620343e6f1d2728baf6f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following is the text of SAB Topic 5.F, Accounting Changes Not Retroactively Applied Due to Immateriality. - Facts: A registrant is required to adopt an accounting principle by means of retrospective adjustment of prior periods' financial statements. However, the registrant determines that the accounting change does not have a material effect on prior periods' financial statements and, accordingly, decides not to retrospectively adjust such financial statements. - Question: In these circumstances, is it acceptable to adjust the beginning balance of retained earnings of the period in which the change is made for the cumulative effect of the change on the financial statements of prior periods? - Interpretive Response: No. If prior periods are not retrospectively adjusted, the cumulative effect of the change should be included in the statement of income for the period in which the change is made. Even in cases where the total cumulative effect is not significant, the staff believes that the amount should be reflected in the results of operations for the period in which the change is made. However, if the cumulative effect is material to current operations or to the trend of the reported results of operations, then the individual income statements of the earlier years should be retrospectively adjusted. ##### [250-10-S99-4](https://asc.understandingaccounting.org/asc/250/10/#250-10-S99-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:32.360Z to 2026-09-09T23:17:32.360Z Record version: sha256:4b6f685d7852cf60022c437c96958860dca1292acd6fda08f41d51a56f16d87e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following is the text of SAB Topic 6.G.2.b, Reporting Requirements for Accounting Changes. - b. Reporting requirements for accounting changes. - 1\. Preferability. - Facts: Rule 10-01(b)(6) of Regulation S-X requires that a registrant who makes a material change in its method of accounting shall indicate the date of and the reason for the change. The registrant also must include as an exhibit in the first Form 10-Q filed subsequent to the date of an accounting change, a letter from the registrant's independent accountants indicating whether or not the change is to an alternative principle which in his judgment is preferable under the circumstances. A letter from the independent accountant is not required when the change is made in response to a standard adopted by the Financial Accounting Standards Board which requires such a change. - Question 1: For some alternative accounting principles, authoritative bodies have specified when one alternative is preferable to another. However, for other alternative accounting principles, no authoritative body has specified criteria for determining the preferability of one alternative over another. In such situations, how should preferability be determined? - Interpretive Response: In such cases, where objective criteria for determining the preferability among alternative accounting principles have not been established by authoritative bodies, the determination of preferability should be based on the particular circumstances described by and discussed with the registrant. In addition, the independent accountant should consider other significant information of which he is aware. FN5 - FN5 Registrants also are reminded that FASB ASC paragraph [250-10-50-1](https://asc.understandingaccounting.org/asc/250/10/#250-10-50-1) (Accounting Changes and Error Corrections Topic) requires that companies disclose the nature of and justification for the change as well as the effects of the change on net income for the period in which the change is made. Furthermore, the justification for the change should explain clearly why the newly adopted principle is preferable to the previously-applied principle. - Question 2: Management may offer, as justification for a change in accounting principle, circumstances such as: their expectation as to the effect of general economic trends on their business (e. g., the impact of inflation), their expectation regarding expanding consumer demand for the company's products, or plans for change in marketing methods. Are these circumstances which enter into the determination of preferability? - Interpretive Response: Yes. Those circumstances are examples of business judgment and planning and should be evaluated in determining preferability. In the case of changes for which objective criteria for determining preferability have not been established by authoritative bodies, business judgment and business planning often are major considerations in determining that the change is to a preferable method because the change results in improved financial reporting. - Question 3: What responsibility does the independent accountant have for evaluating the business judgment and business planning of the registrant? - Interpretive Response: Business judgment and business planning are within the province of the registrant. Thus, the independent accountant may accept the registrant's business judgment and business planning and express reliance thereon in his letter. However, if either the plans or judgment appear to be unreasonable to the independent accountant, he should not accept them as justification. For example, an independent accountant should not accept a registrant's plans for a major expansion if he believes the registrant does not have the means of obtaining the funds necessary for the expansion program. - Question 4: If a registrant, who has changed to an accounting method which was preferable under the circumstances, later finds that it must abandon its business plans or change its business judgment because of economic or other factors, is the registrant's justification nullified? - Interpretive Response: No. A registrant must in good faith justify a change in its method of accounting under the circumstances which exist at the time of the change. The existence of different circumstances at a later time does not nullify the previous justification for the change. - Question 5: If a registrant justified a change in accounting method as preferable under the circumstances, and the circumstances change, may the registrant revert to the method of accounting used before the change? - Interpretive Response: Any time a registrant makes a change in accounting method, the change must be justified as preferable under the circumstances. Thus, a registrant may not change back to a principle previously used unless it can justify that the previously used principle is preferable in the circumstances as they currently exist. - Question 6: If one client of an independent accounting firm changes its method of accounting and the accountant submits the required letter stating his view of the preferability of the principle in the circumstances, does this mean that all clients of that firm are constrained from making the converse change in accounting (e. g., if one client changes from FIFO to LIFO, can no other client change from LIFO to FIFO)? - Interpretive Response: No. Each registrant must justify a change in accounting method on the basis that the method is preferable under the circumstances of that registrant. In addition, a registrant must furnish a letter from its independent accountant stating that in the judgment of the independent accountant the change in method is preferable under the circumstances of that registrant. If registrants in apparently similar circumstances make changes in opposite directions, the staff has a responsibility to inquire as to the factors which were considered in arriving at the determination by each registrant and its independent accountant that the change was preferable under the circumstances because it resulted in improved financial reporting. The staff recognizes the importance, in many circumstances, of the judgments and plans of management and recognizes that such management judgments may, in good faith, differ. As indicated above, the concern relates to registrants in apparently similar circumstances, no matter who their independent accountants may be. - Question 7: If a registrant changes its accounting to one of two methods specifically approved by the FASB in the Accounting Standards Codification, need the independent accountant express his view as to the preferability of the method selected? - Interpretive Response: If a registrant was formerly using a method of accounting no longer deemed acceptable, a change to either method approved by the FASB may be presumed to be a change to a preferable method and no letter will be required from the independent accountant. If, however, the registrant was formerly using one of the methods approved by the FASB for current use and wishes to change to an alternative approved method, then the registrant must justify its change as being one to a preferable method in the circumstances and the independent accountant must submit a letter stating that in his view the change is to a principle that is preferable in the circumstances. - 2\. Filing of a letter from the accountants. - Facts: The registrant makes an accounting change in the fourth quarter of its fiscal year. Rule 10-01(b)(6) of Regulation S-X requires that the registrant file a letter from its independent accountants stating whether or not the change is preferable in the circumstances in the next Form 10-Q. Item 601(b)(18) of Regulation S-K provides that the independent accountant's preferability letter be filed as an exhibit to reports on Forms 10-K or 10-Q. - Question: When the independent accountant's letter is filed with the Form 10-K, must another letter also be filed with the first quarter's Form 10-Q in the following year? - Interpretive Response: No. A letter is not required to be filed with Form 10-Q if it has been previously filed as an exhibit to the Form 10-K. ##### [250-10-S99-5](https://asc.understandingaccounting.org/asc/250/10/#250-10-S99-5) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:32.360Z to 2026-09-09T23:17:32.360Z Record version: sha256:5bf20de451c7eeb8973e4ea08981508e058c91ad11135005ab111b3d1a862270 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following is the text of SAB Topic 11.M, Disclosure of the Impact that Recently Issued Accounting Standards Will Have on the Financial Statements of the Registrant when Adopted in a Future Period. - Facts: An accounting standard has been issued FN5 that does not require adoption until some future date. A registrant is required to include financial statements in filings with the Commission after the issuance of the standard but before it is adopted by the registrant. - FN5 Some registrants may want to disclose the potential effects of proposed accounting standards not yet issued, (e. g., exposure drafts). Such disclosures, which generally are not required because the final standard may differ from the exposure draft, are not addressed by this SAB. See also FRR 26. - Question 1: Does the staff believe that these filings should include disclosure of the impact that the recently issued accounting standard will have on the financial position and results of operations of the registrant when such standard is adopted in a future period? - Interpretive Response: Yes. The Commission addressed a similar issue and concluded that registrants should discuss the potential effects of adoption of recently issued accounting standards in registration statements and reports filed with the Commission. FN6 The staff believes that this disclosure guidance applies to all accounting standards which have been issued but not yet adopted by the registrant unless the impact on its financial position and results of operations is not expected to be material. FN7 MD&A FN8 requires registrants to provide information with respect to liquidity, capital resources and results of operations and such other information that the registrant believes to be necessary to understand its financial condition and results of operations. In addition, MD&A requires disclosure of presently known material changes, trends and uncertainties that have had or that the registrant reasonably expects will have a material impact on future sales, revenues or income from continuing operations. The staff believes that disclosure of impending accounting changes is necessary to inform the reader about expected impacts on financial information to be reported in the future and, therefore, should be disclosed in accordance with the existing MD&A requirements. With respect to financial statement disclosure, GAAS FN9 specifically address the need for the auditor to consider the adequacy of the disclosure of impending changes in accounting principles if (a) the financial statements have been prepared on the basis of accounting principles that were acceptable at the financial statement date but that will not be acceptable in the future and (b) the financial statements will be retrospectively adjusted in the future as a result of the change. The staff believes that recently issued accounting standards may constitute material matters and, therefore, disclosure in the financial statements should also be considered in situations where the change to the new accounting standard will be accounted for in financial statements of future periods, prospectively or with a cumulative catch-up adjustment. - FN6 FRR 6, Section 2. - FN7 In those instances where a recently issued standard will impact the preparation of, but not materially affect, the financial statements, the registrant is encouraged to disclose that a standard has been issued and that its adoption will not have a material effect on its financial position or results of operations. - FN8 Item 303 of Regulation S-K. - FN9 See AU 9410.13-18. - Question 2: Does the staff have a view on the types of disclosure that would be meaningful and appropriate when a new accounting standard has been issued but not yet adopted by the registrant? - Interpretive Response: The staff believes that the registrant should evaluate each new accounting standard to determine the appropriate disclosure and recognizes that the level of information available to the registrant will differ with respect to various standards and from one registrant to another. The objectives of the disclosure should be to (1) notify the reader of the disclosure documents that a standard has been issued which the registrant will be required to adopt in the future and (2) assist the reader in assessing the significance of the impact that the standard will have on the financial statements of the registrant when adopted. The staff understands that the registrant will only be able to disclose information that is known. - The following disclosures should generally be considered by the registrant: - A brief description of the new standard, the date that adoption is required and the date that the registrant plans to adopt, if earlier. - A discussion of the methods of adoption allowed by the standard and the method expected to be utilized by the registrant, if determined. - A discussion of the impact that adoption of the standard is expected to have on the financial statements of the registrant, unless not known or reasonably estimable. In that case, a statement to that effect may be made. - Disclosure of the potential impact of other significant matters that the registrant believes might result from the adoption of the standard (such as technical violations of debt covenant agreements, planned or intended changes in business practices, etc.) is encouraged. ##### [250-10-S99-6](https://asc.understandingaccounting.org/asc/250/10/#250-10-S99-6) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:32.360Z to 2026-09-09T23:17:32.360Z Record version: sha256:d2b63b553d2e5551c0217db90ce36e915224db0d279fc1751f3d3cdc14792235 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following is the text of SEC Staff Announcement: Disclosure of the Impact That Recently Issued Accounting Standards Will Have on the Financial Statements of a Registrant When Such Standards Are Adopted in a Future Period (in accordance with Staff Accounting Bulletin \[SAB\] Topic 11.M). - This announcement applies to Accounting Standards Update (ASU) No. 2014-09, _Revenue from Contracts with Customers (Topic 606);_ ASU No. 2016-02, _Leases (Topic 842);_ and ASU No. 2016-13, _Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments._ FN1 - SAB Topic 11.M provides the SEC staff view that a registrant should evaluate ASUs that have not yet been adopted to determine the appropriate financial statement disclosures FN2 about the potential material effects of those ASUs on the financial statements when adopted. Consistent with Topic 11.M, if a registrant does not know or cannot reasonably estimate the impact that adoption of the ASUs referenced in this announcement is expected to have on the financial statements, then in addition to making a statement to that effect, that registrant should consider additional qualitative financial statement disclosures to assist the reader in assessing the significance of the impact that the standard will have on the financial statements of the registrant when adopted. In this regard, the SEC staff expects the additional qualitative disclosures to include a description of the effect of the accounting policies that the registrant expects to apply, if determined, and a comparison to the registrant's current accounting policies. Also, a registrant should describe the status of its process to implement the new standards and the significant implementation matters yet to be addressed. - FN 1 This announcement also applies to any subsequent amendments to guidance in the ASUs that are issued prior to a registrant's adoption of the aforementioned ASUs. - FN 2 Topic 11.M provides SEC staff views on disclosures that registrants should consider in both Management's Discussion & Analysis (MD&A) and the notes to the financial statements. MD&A may contain cross references to these disclosures that appear within the notes to the financial statements. Source downloaded (UTC): 2026-09-09T23:17:35.160Z to 2026-09-09T23:17:44.112Z Record version: sha256:f90e6d8342233f64dc2ac9c57b5a620ad251b4d72e1e667732aebb173146eb40 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 250-978: Accounting Changes and Error Corrections — Real Estate—Time-Sharing Activities ### Machine-generated study aids ```json { "summary": "This Subtopic tells time-share sellers how to account for a change in the delineation of a time-share project or its phases. If the change results from a significant change in facts and circumstances about the project's development (e.g., major sales price or discount revisions, construction cost or inflation changes, temporary construction delays, design changes, or a shift toward more luxury units), it is a change in accounting estimate under Subtopic 250-10, recorded as a current-period adjustment per 978-330-35-1. If there is no such change in facts and circumstances, the change is a change in the method of applying an accounting principle under Subtopic 250-10.", "key_points": [ "This Subtopic addresses changes in the delineation of time-share projects and phases (250-978-05-1).", "Scope follows the Overall Subtopic scope in Section 978-10-15 (250-978-15-1).", "A redelineation driven by a significant change in facts and circumstances related to project development is a change in accounting estimate under Subtopic 250-10, accounted for by current-period adjustment as discussed in 978-330-35-1 (250-978-35-1).", "Examples of qualifying significant changes include significant revisions in sales prices or discount programs, construction contract price or inflation changes, temporary construction delays, design changes, and a decision to significantly increase the proportion of luxury versus standard units (250-978-35-1).", "A redelineation without a significant change in facts and circumstances is a change in the method of applying an accounting principle under Subtopic 250-10 (250-978-35-1).", "Merely dividing the same project development into more or fewer phases changes only how the project is accounted for, not the nature of the project, and therefore is the latter type of change (250-978-35-1)." ], "categories": [ "Industry-specific", "Subsequent measurement", "Presentation", "Inventory and PP&E" ], "audience_level": "advanced", "student_note": "The exam trap is assuming every redelineation of a time-share project is an estimate change; the trigger is whether the underlying development facts and circumstances actually changed—if the seller merely re-slices the same development into more or fewer phases, it is a change in the method of applying an accounting principle instead.", "related_topics": [ "250-10", "978-10", "978-330", "978-605", "360-10" ], "key_concepts": [ "time-share project delineation", "project phases", "change in accounting estimate", "change in method of applying an accounting principle", "current-period adjustment", "real estate time-sharing", "significant change in facts and circumstances" ] } ``` Source downloaded (UTC): 2026-09-09T23:17:35.160Z to 2026-09-09T23:17:35.160Z Record version: sha256:5d3a1d89aca30e5b8ca0f95f6d2e986b8acd90856ac9f8bf253f8742cbbaed23 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 250-978-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/250/978/#05-overview-and-background) SEC content: no ##### [250-978-05-1](https://asc.understandingaccounting.org/asc/250/978/#250-978-05-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:35.160Z to 2026-09-09T23:17:35.160Z Record version: sha256:d7748c48f83e72acb14449dacf2a35386cd62397ca727a3f89addbeb24fbcf22 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic addresses changes in the delineation of [time-share](https://asc.understandingaccounting.org/glossary/t/#time-share "See Interval.") projects and phases. Source downloaded (UTC): 2026-09-09T23:17:38.142Z to 2026-09-09T23:17:38.142Z Record version: sha256:0ae1cc7bba57af731d70da4f4aa1eed07e3490c39e6ae1d7230dbe6d10f7a5f7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 250-978-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/250/978/#15-scope-and-scope-exceptions) SEC content: no #### Overall Guidance ##### [250-978-15-1](https://asc.understandingaccounting.org/asc/250/978/#250-978-15-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:38.142Z to 2026-09-09T23:17:38.142Z Record version: sha256:0c7a793399a2f270fcf2f206692aa2d57d6df652c09f09609a133978e3ba8f14 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic follows the same Scope and Scope Exceptions as the Overall Subtopic, see Section 978-10-15. Source downloaded (UTC): 2026-09-09T23:17:44.112Z to 2026-09-09T23:17:44.112Z Record version: sha256:5f7457afe2a9486e373cda843eaccadd417f98f3819a5456e497d0141fe89d56 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 250-978-35: 35 Subsequent Measurement [Read section](https://asc.understandingaccounting.org/asc/250/978/#35-subsequent-measurement) SEC content: no #### Seller Identification of Projects and Phases ##### [250-978-35-1](https://asc.understandingaccounting.org/asc/250/978/#250-978-35-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:44.112Z to 2026-09-09T23:17:44.112Z Record version: sha256:4b78c3dea7fffbe13c9127c6555302002f0be39151113b86fd9be387e52d0ae8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A change in the delineation of a [project](https://asc.understandingaccounting.org/glossary/p/#project "A time-sharing development; some projects may be completed in a single phase, such as a single, one-story building containing several time-sharing units. Other projects may be completed in several phases, for example: A hotel that is being converted to time-sharing units one floor at a time while the unconverted units continue to be rented A number of buildings, each containing several time-sharing units, being built on a piece of property over an extended period of time.") or its phases that results from a significant change in facts and circumstances related to the project's development—for example, significant revisions in sales prices or discount programs, construction contract price or inflation changes, temporary construction delays, design changes, or a decision by the seller to increase significantly the proportion of luxury versus standard units in a project—shall be accounted for as a change in accounting estimate in accordance with Subtopic 250-10 using a current-period adjustment as discussed in paragraph [978-330-35-1](https://asc.understandingaccounting.org/asc/330/978/#330-978-35-1). A change in the delineation of a project or its phases without a significant change in facts and circumstances related to the project's development shall be accounted for as a change in the method of applying an accounting principle under Subtopic 250-10. An example of this latter change would be a decision to divide the same development of a project into more or fewer phases, which would be a change only in how the project is accounted for rather than a change in the nature (that is, the facts and circumstances) of the project itself. Source downloaded (UTC): 2026-09-09T23:17:47.227Z to 2026-09-09T23:17:57.739Z Record version: sha256:3d8b9daa6f3caabd83d7af7fa795316ff6d9d5942b9ca26ba966ace57e7c0c82 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 250-980: Accounting Changes and Error Corrections — Regulated Operations ### Machine-generated study aids ```json { "summary": "This Subtopic applies the general accounting change and error correction rules of Topic 250 to entities with regulated operations that meet the criteria of paragraph 980-10-15-2 (so that costs designated for future recovery by the regulator are probable of recovery). Its core rule is that a change in accounting method that does not affect costs allowable for rate-making purposes is reported the same way an unregulated entity would report it, whereas a change that does affect allowable costs is generally implemented the way it is implemented for regulatory purposes. It also confirms that prior period adjustments are limited to error corrections and prior interim period adjustments of the current fiscal year, and that previously unaccrued estimated refunds are charged to income when the accrual criteria are first met.", "key_points": [ "All guidance in this Subtopic assumes the entity meets the criteria in paragraph 980-10-15-2, so recovery of any cost designated for future recovery by the regulator is probable (250-980-55-1).", "A change in accounting method that does not affect costs allowable for rate-making purposes is applied in the same manner as by an unregulated entity (250-980-55-3).", "A change in accounting method that does affect allowable costs for rate-making purposes is generally implemented in the way it is implemented for regulatory purposes; changing between capitalization/amortization and expensing of research and development costs is cited as an example (250-980-55-3).", "Paragraphs 250-10-45-25 through 45-26 limit prior period adjustments (other than those resulting from reporting accounting changes) to corrections of errors and adjustments related to prior interim periods of the current fiscal year (250-980-55-4).", "Estimated refunds not previously accrued are charged to income in the first period in which they meet the accrual criteria of paragraph 450-20-25-2 (250-980-55-5).", "If estimated refund amounts are material, the disclosures specified in paragraph 980-605-50-1 must be furnished (250-980-55-5).", "The Subtopic follows the same scope and scope exceptions as Section 980-10-15 (250-980-15-1)." ], "categories": [ "Industry-specific", "Presentation", "Disclosure", "Recognition" ], "audience_level": "intermediate", "student_note": "The key exam trap is assuming regulated entities always follow Topic 250's retrospective-application default: they do only when the change does not affect rate-making allowable costs; if it does, the regulatory treatment generally drives the accounting. Remember this only works if the entity qualifies under 980-10-15-2.", "related_topics": [ "980-10", "980-605", "250-10", "450-20", "730-10" ], "key_concepts": [ "regulated operations", "change in accounting principle", "allowable costs for rate-making", "prior period adjustment", "error correction", "estimated refunds", "regulatory accounting", "research and development costs" ] } ``` Source downloaded (UTC): 2026-09-09T23:17:47.227Z to 2026-09-09T23:17:47.227Z Record version: sha256:daa6972a204b558f04cd76b040cf51beb46db2bb7e4f1a66abd899a9ba4d9f96 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 250-980-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/250/980/#00-status) SEC content: no ##### [250-980-00-1](https://asc.understandingaccounting.org/asc/250/980/#250-980-00-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:47.227Z to 2026-09-09T23:17:47.227Z Record version: sha256:2c5ab177c0bf9a91edff8a871782b037eb44784dcbe02765f6e6c3997cfd6495 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following table identifies the changes made to this Subtopic.
ParagraphActionAccounting Standards UpdateDate
980-250-55-3AmendedAccounting Standards Update No. 2016-0202/25/2016
Source downloaded (UTC): 2026-09-09T23:17:49.225Z to 2026-09-09T23:17:49.225Z Record version: sha256:43f244b641c4ff5ba5bbe6f13dd4f9fbd33bcefeb89f77fb28e7bb29cf431205 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 250-980-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/250/980/#05-overview-and-background) SEC content: no ##### [250-980-05-1](https://asc.understandingaccounting.org/asc/250/980/#250-980-05-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:49.225Z to 2026-09-09T23:17:49.225Z Record version: sha256:69424cfe73e296e7d38a428f0fa8f724319a63d20750e317bc865016c1e73ba0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic provides guidance for accounting changes and error corrections for entities with regulated operations. Source downloaded (UTC): 2026-09-09T23:17:53.101Z to 2026-09-09T23:17:53.101Z Record version: sha256:b31a309a9880cc5e8192a0f6afc255b16b0554c9583da78e1e1d1cfeae70ddad Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 250-980-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/250/980/#15-scope-and-scope-exceptions) SEC content: no #### Overall Guidance ##### [250-980-15-1](https://asc.understandingaccounting.org/asc/250/980/#250-980-15-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:53.101Z to 2026-09-09T23:17:53.101Z Record version: sha256:adc6d418d29ce43acfc59b3aa3c729e77c602f1093c2fdb9740d3bf67eb29e52 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 980-10-15. Source downloaded (UTC): 2026-09-09T23:17:57.739Z to 2026-09-09T23:17:57.739Z Record version: sha256:3507def1ae28e8bfe9b3ddd5c1cf619f355a37ee62f84c244cfa1d93549184e5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 250-980-55: 55 Implementation Guidance and Illustrations [Read section](https://asc.understandingaccounting.org/asc/250/980/#55-implementation-guidance-and-illustrations) SEC content: no #### Implementation Guidance ##### [250-980-55-1](https://asc.understandingaccounting.org/asc/250/980/#250-980-55-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:57.739Z to 2026-09-09T23:17:57.739Z Record version: sha256:7a290dc696f5acf91b0ecb689b0cb61d9efcd9d98f2e56852036bc3dc5a0867b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. All of the following guidance assumes that the entity meets the criteria in paragraph [980-10-15-2](https://asc.understandingaccounting.org/asc/980/10/#980-10-15-2); thus, recovery of any cost is probable if that cost is designated for future recovery by the regulator. ##### [250-980-55-2](https://asc.understandingaccounting.org/asc/250/980/#250-980-55-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:57.739Z to 2026-09-09T23:17:57.739Z Record version: sha256:2de0e576fd715fdbdad33f5f3848759da1751c47af37ea57d11c76e27f0d73fb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Topic 250 defines various types of accounting changes and establishes guidelines for reporting each type. ##### [250-980-55-3](https://asc.understandingaccounting.org/asc/250/980/#250-980-55-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:57.739Z to 2026-09-09T23:17:57.739Z Record version: sha256:11a19389d64f070455593ce9cd5407f1773a7ad3f7a57617f144ed5172431366 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If a regulated entity changes accounting methods and the change does not affect costs that are allowable for rate-making purposes, the regulated entity would apply the change in the same manner as would an unregulated entity. If a regulated entity changes accounting methods and the change affects [allowable costs](https://asc.understandingaccounting.org/glossary/a/#allowable-costs "All costs for which revenue is intended to provide recovery. Those costs can be actual or estimated. In that context, allowable costs include interest cost and amounts provided for earnings on shareholders' investments.") for rate-making purposes, the change generally would be implemented in the way that it is implemented for regulatory purposes. A change in the method of accounting for research and development costs, either from a policy of capitalization and amortization to one of charging those costs to expense as incurred or vice versa, is an example of that type of change. ##### [250-980-55-4](https://asc.understandingaccounting.org/asc/250/980/#250-980-55-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:57.739Z to 2026-09-09T23:17:57.739Z Record version: sha256:66b79e6e52544407536d40e50d44005aea6b384ad86024d7a5242a9a87c0a797 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraphs [250-10-45-25 through 45-26](https://asc.understandingaccounting.org/asc/250/10/#250-10-45-25) limit prior period adjustments (other than those that result from reporting accounting changes) to corrections of errors and adjustments related to prior interim periods of the current fiscal year. ##### [250-980-55-5](https://asc.understandingaccounting.org/asc/250/980/#250-980-55-5) Pending content: no Source downloaded (UTC): 2026-09-09T23:17:57.739Z to 2026-09-09T23:17:57.739Z Record version: sha256:147bd06bc50d27cec1705af83c63325ff2d2ae979a13e062908c87f93575031e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In accordance with Section 250-10-45, estimated refunds that were not previously accrued would be charged to income in the first period in which they meet the criteria for accrual (see paragraph [450-20-25-2](https://asc.understandingaccounting.org/asc/450/20/#450-20-25-2)). If the amounts are material, the disclosures specified in paragraph [980-605-50-1](https://asc.understandingaccounting.org/asc/605/980/#605-980-50-1) should be furnished.