Accounting changes may occur at any time during the year. This section discusses the disclosure requirements when changes occur during an interim period.

30.9.1 Changes in accounting principle (interim periods)

Interim financial statements should disclose any changes in accounting principle made during the current period from the accounting principles previously applied in any of the following prior periods:
  • The comparable interim period of the prior annual period
  • The preceding interim periods in the current annual period
  • The prior annual period

An accounting change that affects only interim periods (such as in the method of recognizing advertising expenses in interim periods) is acceptable only if it is preferable in the circumstances. Such a change does not require any reference in the auditor's report on the annual financial statements (as there is no effect on the annual financial statements).
As discussed in ASC 250-10-45-16, whenever possible and permitted by the applicable guidance, reporting entities should adopt accounting changes during the first interim period of a fiscal year (unless adoption is expressly permitted in any interim period). If it is impracticable to make a change in the first interim period, the impracticability exception discussed in FSP may not be applied to prior interim periods of the fiscal year in which the change is made. Therefore, if the retrospective application to pre-change interim periods is impracticable, the change may only be made as of the beginning of a subsequent fiscal year. See FSP for further information on the impracticability exception of retrospective application when a reporting entity changes an accounting principle.
The materiality of changes in accounting principle should be assessed in relation to the estimated full fiscal year income rather than interim income. Changes that are only material to the interim period of adoption but not to the estimated full year financial results should be separately disclosed in the interim period.

30.9.2 Recently adopted standards (interim periods)

As discussed in ASC 250-10-50-2, when a reporting entity adopts a new accounting standard in an interim period, both annual and interim period financial statement disclosures prescribed by the new accounting standard are expected in each interim report in the year of adoption, to the extent not duplicative of other disclosures.

30.9.3 Change in estimates (interim periods)

As discussed in ASC 250-10-45-17, the effect of a change in estimate, including a change in the estimated annual effective tax rate, should be accounted for in the period in which the change in estimate is made. Prior interim periods should not be restated. Further, the effect on earnings of a change in estimate in a current interim period should be disclosed in both the current period and subsequent interim periods, if material to any period presented.
To the extent all prior periods presented do not reflect the change in estimate, the change should also be disclosed in the interim period financial statements of the subsequent year to avoid misleading comparisons.

30.9.4 Errors related to prior interim periods

Errors related to prior interim periods should be assessed using the framework discussed in FSP 30.7.
As discussed in ASC 250-10-45-23, when an error is identified and it has been determined that prior interim period financial statements are materially misstated, they should be corrected promptly (i.e., restated).
When an error is identified and it has been determined that prior interim periods are not materially misstated, for the purpose of determining how to correct the error (i.e., by recording an out-of-period adjustment or revising the prior period financial statements), amounts should be compared to the estimated income for the full fiscal year.
As discussed in FSP 30.7.2 and shown in Figure FSP 30-1, corrections that are material with respect to the estimated income for the full fiscal year or to the trend of earnings should be corrected by revising the prior period financial statements the next time they are presented. Further, as discussed in ASC 250-10-45-26 and ASC 250-10-50-11, corrections 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, can be corrected as an out-of-period adjustment and separately disclosed in the interim period. Alternatively, the previously issued financial statements may be revised the next time they are issued.
Previously reported interim financial data should not be restated because of year-end adjustments made in the normal course of the year-end close process, unless errors related to prior interim periods are identified from the process. The effect of significant year-end adjustments, such as changes in provisions for doubtful accounts, that are not error corrections should be included in fourth quarter income.
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