Accounting Errors and Policy Changes Are Handled Retrospectively, with an Adjustment

question 132

True/False

Accounting errors and policy changes are handled retrospectively, with an adjustment to opening Retained Earnings to correct for the effects of these, while changes in accounting estimates are handled prospectively.

---

Definitions:

Central Banks

National banks that provide financial and banking services for a country's government and commercial banking system, as well as implementing government's monetary policy and issuing currency.

Required Reserve Ratio

The fraction of deposits that banks are required to hold in reserve and not lend out, determined by the central bank.

Interest Rates

The cost of borrowing money or the return on investing, typically expressed as a percentage of the principal, and set by central banks or determined by the market.

Excess Reserves

The capital reserves held by a bank or financial institution in excess of what is required by regulators, creditors, or internal controls.