If a company adopts a new accounting principle, it must justify the change on the grounds that the new principle
A) increases the relevance of the financial statements.
B) increases the reliability of the financial statements.
C) is preferable to the old principle.
D) increases the transparency of the financial statements.

Question

Quizplus · Accepted Answer

When a company adopts a new accounting principle, it must justify the change by demonstrating that the new principle is preferable to the old one. This preference could be due to various reasons, including relevance, reliability, or transparency improvements, but the core requirement is that the new principle is considered an overall better option.

If a Company Adopts a New Accounting Principle, It Must