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

Question

Quizplus · Accepted Answer

Changes in accounting principles, such as the change in accounting for long-term construction contracts from a completed-contract method to a revenue-over-time method, should be accounted for retrospectively. This approach requires the adjustment of prior period financial statements as if the new accounting principle had always been used. Changes in estimates (A) and changes in depreciation methods (B) are accounted for prospectively, and changes in inventory costing methods (D) may have specific requirements but are generally not applied retrospectively in the same manner as changes in accounting principles.

Which of the Following Changes Should Be Accounted for Using