Which of the Following Is Characteristic of a Change in Accounting

question 29

Multiple Choice

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

• 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:

Recovery Phase

A period in the economic cycle where economic activity starts to increase again after a recession, leading to growth in GDP and employment.

Prosperity

A state of economic well-being and flourishing, characterized by financial success and material wealth.

Consumer Price Index

An indicator that measures the average price weighted across a mix of consumer goods and services, including but not limited to transportation, food, and healthcare.

Deflation

A drop in the overall price of goods and services, frequently signifying a decrease in the economy's money or credit supply.