One of the Disclosure Requirements for a Change in Accounting

question 79

True/False

One of the disclosure requirements for a change in accounting principle is to show the cumulative effect of the change on retained earnings as of the beginning of the earliest period presented.

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Definitions:

NPV

Net Present Value; a method used in capital budgeting to evaluate the profitability of an investment or project, calculated by summing the present values of incoming and outgoing cash flows.

Preferred Stock

A security that pays a constant dividend forever. A hybrid between debt and common equity.

Hybrid Security

A financial instrument that combines characteristics of both equity and debt, often providing fixed income or dividends as well as the potential for capital appreciation.

Equity

An ownership interest. The portion of a firm’s capital representing funds belonging to its shareholders. An equity investment is an investment in stock.