Which of the Following Is Characteristic of a Change in Accounting

question 23

Multiple Choice

Which of the following is characteristic of a change in accounting principle?

• A) Requires the reporting of pro forma amounts for prior periods
• B) Does not affect the financial statements of prior periods
• C) Never needs to be disclosed
• D) Should be reported by retrospectively adjusting the financial statements for all years reported,and reporting the cumulative effect of the change in income for all preceding years as an adjustment to the beginning balance of retained earnings for the earliest year reported

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Definitions:

Loss Aversion

Tendency for individuals to prefer avoiding losses over acquiring gains.

Stock Market

A marketplace where shares of public companies are bought and sold, providing a platform for the issuance and trading of equity securities.

Investor

An individual or entity that allocates capital with the expectation of obtaining a financial return or profit.

Price Level

The average of current prices across the entire spectrum of goods and services produced in the economy.