Which of the following changes should be accounted for using the retrospective approach?
A) A change in the estimated life of a depreciable asset.
B) A change from straight-line to declining balance depreciation.
C) A change to the LIFO method of costing inventories.
D) A change in accounting for long-term construction contracts by recognizing revenue over time rather than when the contract is completed.

Question

Quizplus · Accepted Answer

Changes in accounting principles, such as a change in the method of recognizing revenue from long-term construction contracts (from recognizing at completion to over time), should be accounted for retrospectively. This approach requires adjusting prior period financial statements as if the new accounting principle had always been used, to ensure comparability across periods. Changes in estimates (A) or changes in depreciation methods (B) are accounted for prospectively, and changes in inventory costing methods (C) may have specific accounting treatment but are not typically applied retrospectively in the same manner as changes in accounting principles.

Which of the Following Changes Should Be Accounted for Using