depreciation question (accounting)?

Question

explain the accounting treatment and and disclosures required when a change is made to the depreciation method.

Answer 1

Summary of Statement No. 154
Accounting Changes and Error Corrections—a replacement of APB Opinion No. 20 and FASB Statement No. 3

This Statement requires that a change in depreciation, amortization, or depletion method for long-lived, nonfinancial assets be accounted for as a change in accounting estimate that is effected by a change in accounting principle.
This Statement requires retrospective application to prior periods’ financial statements of changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. When it is impracticable to determine the period-specific effects of an accounting change on one or more individual prior periods presented, this Statement requires that the new accounting principle be applied to the balances of assets and liabilities as of the beginning of the earliest period for which retrospective application is practicable and that a corresponding adjustment be made to the opening balance of retained earnings (or other appropriate components of equity or net assets in the statement of financial position) for that period rather than being reported in an income statement. When it is impracticable to determine the cumulative effect of applying a change in accounting principle to all prior periods, this Statement requires that the new accounting principle be applied as if it were adopted prospectively from the earliest date practicable.
This Statement defines retrospective application as the application of a different accounting principle to prior accounting periods as if that principle had always been used or as the adjustment of previously issued financial statements to reflect a change in the reporting entity.

Disclosures
17. An entity shall disclose the following in the fiscal period in which a change in accounting principle is made:
a. The nature of and reason for the change in accounting principle, including an explanation of why the newly adopted accounting principle is preferable.
b. The method of applying the change, and:
(1) A description of the prior-period information that has been retrospectively adjusted, if any.
(2) The effect of the change on income from continuing operations, net income (or other appropriate captions of changes in the applicable net assets or performance
indicator), any other affected financial statement line item, and any affected per-share amounts for the current period and any prior periods retrospectively adjusted. Presentation of the effect on financial statement subtotals and totals
other than income from continuing operations and net income (or other appropriate captions of changes in the applicable net assets or performance indicator) is not required.
(3) The cumulative effect of the change on retained earnings or other components of equity or net assets in the statement of financial position as of the beginning of the earliest period presented.
(4) If retrospective application to all prior periods (paragraph 7) is impracticable, disclosure of the reasons therefor, and a description of the alternative method used to report the change (paragraphs 8 and 9).

Answer 2

Depreciation reduces net income so the business pays less income taxes. It is a deduction. It has no affect on cash flow.

Any material changes is noted in the footnotes to the financial statements.