When a firm decides to change an accounting principal,but does not have sufficient information to use the retrospective approach,it may ________.
A)estimate the numbers to do so
B)declare the change to be impractical
C)be forced to abandon the change
D)use the prospective approach

Question

Quizplus · Accepted Answer

If a firm decides to change an accounting principle but lacks sufficient information to use the retrospective approach, it may use the prospective approach. This approach involves implementing the new principle in the current period without adjusting prior periods' financial statements. It is a more straightforward approach that avoids the complexities and potential inaccuracies of estimating the numbers for the retrospective approach. Therefore, option D is the best choice. Option A is incorrect because estimating the numbers could lead to inaccuracies and could be considered a violation of GAAP. Option B is not applicable since the change is not necessarily impractical. Finally, option C is incorrect because there is no requirement to abandon the change, especially if using the prospective approach is feasible.

When a Firm Decides to Change an Accounting Principal,but Does