Most Changes in Accounting Principles Are Accounted for Retrospectively

question 22

Essay

Most changes in accounting principles are accounted for retrospectively.Discuss how a change in accounting principle that causes a retrospective adjustment impacts the comparative financial statements issued for the current year.

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Definitions:

Market Value

The price at this moment for buying or selling an asset or service in the market.

Stock Dividend

A stock dividend is a payment made in the form of additional shares instead of cash, reflecting a company's desire to reward shareholders without reducing cash on hand.

Par Value

The face value of a bond or stock as stated by the issuer, which may differ from its market value.

Capital in Excess

Funds received by a company over and above the par value of its stock, also known as additional paid-in capital.