Sandwich State Bank has followed the practice of capitalizing certain

QUESTION

Sandwich State Bank has followed the practice of capitalizing certain marketing costs and amortizing these costs over their expected life. In the current year, the bank determined that the future benefits from these costs were doubtful. Consequently, the bank adopted the policy of expensing these costs as incurred. How should the bank report this accounting change in the comparative financial statements?
Solution: Sandwich State Bank requires that changes in depreciation, amortization or depletion methods for long-term, nonfinancial assets must be accounted for as a change in accounting estimation due to a change in accounting principle. This change in US GAAP reflects the accounting treatment in IAS 8. Companies will have to¦

demonstrate that change in approximation of stemming from a change in accounting principle is preferable. Such changes must be accounted for prospectively with no restatement of previously issued financial statements.

ANSWER:

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