Stockton Ltd. changed its inventory system from FIFO to average cost. What type of accounting change does this represent?
A) A change in accounting estimate for which the financial statements for the prior periods included for comparative purposes do not need to be restated.
B) A change in accounting policy for which the financial statements for prior periods included for comparative purposes do not need to be restated.
C) A change in accounting policy for which the financial statements for prior periods included for comparative purposes should be restated.
D) A change in accounting estimate for which the financial statements for prior periods included for comparative purposes should be restated.

Question

Quizplus · Accepted Answer

Changing from FIFO to the average cost method is considered a change in accounting policy. According to accounting standards, when a company changes its accounting policy, it should restate the financial statements for prior periods included for comparative purposes to ensure consistency and comparability.