The Effect of a Change in Accounting Principle That Is

question 21

Multiple Choice

The effect of a change in accounting principle that is inseparable from the effect of a change in accounting estimate should be reported

• A) in the period of change and future periods.
• B) by restating the financial statements of all prior periods presented.
• C) by showing the pro forma effects of retroactive application.
• D) as a correction of an error.

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Definitions:

Eligible Dividends

Dividends that are designated by a corporation to be eligible for a lower tax rate for the receiver, depending on jurisdiction.

Average Tax Rate

The percentage of total income that goes to taxes, calculated by dividing the total amount of tax paid by the total income.

Taxable Income

The sum of earnings that determines the tax liability of a person or corporation to the state.

Marginal Provincial Tax Rate

The percentage of tax applied to your next dollar of income, specific to the tax brackets determined by a Canadian province.