What it is
A change in accounting principle, a change in estimate and an error correction look alike on the day they are proposed and are accounted for very differently. This memo classifies the change first, so the treatment, the periods adjusted and the disclosures follow from the classification.
It covers policy elections, changes in principle with preferability support, changes in estimate, changes in reporting entity and error corrections, with a materiality section for errors, an effect table for current and prior periods and opening retained earnings, the ASC 250 disclosures and approvals.
When to use it
- Before the entity changes from one acceptable accounting principle to another, or makes an election a standard allows.
- When an estimate changes, or a method change is made to change an estimate.
- When a prior-period error is found and the team must decide between restatement, revision and a current-period correction.
What’s inside
- Classification questions that separate policy elections, the kinds of accounting change and error corrections
- Alternatives grid with a preferability section
- Treatment table: retrospective, prospective, transition method or restatement
- Effect table for current period, prior periods and opening retained earnings
- Error materiality questions, disclosure list, implementation steps and approvals
Standard cited
This template follows ASC 250 / US GAAP. It is written in our own words, except for phrases the standard requires the document to contain, with [bracketed placeholders] for client details, amounts in USD and dates as MM/DD/YYYY. Check it against the current standard and your firm’s methodology before use.
Questions
How is this different from a topic memo?
A topic memo, such as the ASC 606 or ASC 450 memo, records a judgment on a transaction. This memo records a change in how the entity accounts, or a correction, and the ASC 250 treatment and disclosures that follow.
What does preferability mean?
A voluntary change in accounting principle is allowed only when the new principle is preferable. The memo records why, with reference to the economics of the transactions, industry practice or newer guidance.
Is a change in estimate restated?
No. It is applied in the period of change and later periods. A change in method made to change an estimate, such as a depreciation method, is treated the same way.
When is a prior period restated?
When an error is material to the prior-period statements. When it is not, but correcting it in the current period would materially misstate that period, the prior periods are revised in the current statements. The memo walks through both questions.
Related templates
- Debt Classification and Covenant Memo (ASC 470)
- Loss Contingency Memo (ASC 450)
- Summary of Significant Accounting Policies Note Shell (Note 1)
- Audit Memo Template (Matter, Evidence, Conclusion)
Last updated 11/05/2026. All free templates.