Changing the cost or equity method of accounting for investments is an example of a change in reporting entity.

Question

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A change in accounting method is considered a change in reporting entity because it affects the way financial information is presented and can have a significant impact on reported financial results. In this specific example, changing from the cost method to the equity method or vice versa will affect how the investment is valued on the balance sheet and how any gains or losses are recognized on the income statement.

Changing the Cost or Equity Method of Accounting for Investments