When There Has Been a Change in Accounting Principle

question 55

Multiple Choice

When there has been a change in accounting principle,

• A)the old principle should be used in reporting the results of operations for the current year.
• B)the cumulative effect of the change should be reported in the current year's retained earnings statement.
• C)the change should be reported retroactively.
• D)the new principle should be used in reporting the results of operations of the current year, but there is no change to prior years.

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Definitions:

Financial Statements

Reports that provide information about an entity's financial performance and position.

Intracompany Comparability

This term is not commonly used; it may refer to the ability to compare financial information within the same company across different periods or departments.

LIFO

Last In, First Out (LIFO) is an inventory valuation method that assumes the most recently produced or acquired items are the first to be sold, affecting the cost of goods sold and inventory valuation.