Change in estimate? Change in accounting principle? What it means

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03/09/21

PwC goes back to the basics to cover the fundamentals of accounting for changes in estimates and changes in accounting principles, and why it matters.

Distinguishing between a change in accounting principle and a change in estimate can be difficult, but the distinction is critical to applying the correct guidance. To help think through the accounting, host Heather Horn is joined by Pat Durbin and Tom Barbieri, Deputy Chief Accountants in PwC’s National Office.

Topics include:

  • 0:41 - Background. We start with an overview of the different types of accounting changes and provide examples of each.
  • 4:33 - Change in accounting principle. Pat walks through the steps that companies should take when changing an accounting principle, and how to navigate the preferability assessment.
  • 18:03 - Accounting for changes in accounting principles. Once you’ve identified a change in principle, how is that reflected in the financial statements? Tom explains the two step process and shares thoughts on disclosures.
  • 30:21 - Change in estimate. Changes in estimate frequently come up as a result of new information or modifications to estimating techniques. Pat highlights the accounting considerations.
  • 35:33 - Key reminders. Don’t wait! Tom covers key reminders, including preferability letters and capturing the appropriate disclosures.

Want to learn more? Read chapter 30 of our Financial statement presentation guide.

About our guests

Tom Barbieri is a Deputy Chief Accountant in PwC’s National Office and the financial instruments accounting leader. He has nearly 30 years of experience advising clients on complex accounting and financial reporting issues relating to financial instruments. During Tom’s tenure in National, he has been at the forefront of emerging accounting issues and has regular interactions with the FASB, SEC, and other regulators and standard setters.

Pat Durbin is a Deputy Chief Accountant in PwC’s National Office and the leader of the revenue and liabilities division. He has nearly 30 years of experience consulting with our clients and engagement teams on complex accounting matters, including issues related to revenue, compensation, income taxes, and inventory under both US GAAP and IFRS.

About our host

Heather Horn is PwC’s National Office thought leader, responsible for developing our communications strategy and conveying firm positions on accounting and financial reporting matters. She is the engaging host of PwC’s accounting and reporting weekly podcast and quarterly webcast series, as well as periodic webcasts for the power and utilities industry. With nearly 30 years of experience, Heather’s accounting and auditing expertise includes financial instruments and rate-regulated accounting.

Contact us

Heather Horn

Heather Horn

US Strategic Thought Leader, National Professional Services Group, PwC US

David Schmid

David Schmid

International Accounting Leader, National Professional Services Group, PwC US

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