When a Firm Decides to Change an Accounting Principle, but Does

question 101

Multiple Choice

When a firm decides to change an accounting principle, but does not have sufficient information to use the retrospective approach, it may ________.

• A) estimate the numbers to do so
• B) declare the change to be impractical
• C) be forced to abandon the change
• D) use the prospective approach

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Definitions:

Corporate Capital

Funds and resources that a corporation utilizes for operations, growth, and to undertake new projects, including both equity and debt capital.

Partners' Equity

The total interest or claim that all partners have in the net assets of a partnership.

Market Price

The present value at which a service or asset is available for purchase or sale in the marketplace.

Par Value

The face value of a bond or stock as stated by the issuing company, unrelated to its market value. It's a nominal value used for accounting purposes.