An accounting change generally results from a change in accounting principle, change in estimate, or change in reporting entity. The correction of an error in previously issued financial statements is not an accounting change. However, because the correction of an error requires adjustments to previously issued financial statements, similar to those required when applying an accounting change retrospectively, the guidance for error corrections is also included in ASC 250, Accounting Changes and Error Corrections. Distinguishing between each scenario can be difficult, but the distinction is critical to applying the appropriate reporting framework.

This chapter provides guidance on how to distinguish between a change in accounting principle, a change in estimate, and the correction of an error, and addresses the presentation and disclosure considerations for each. It also discusses the presentation and disclosure related to changes in a reporting entity.