During 2016,Hoffman Co.decides to use FIFO to account for its inventory transactions.Previously,it had used LIFO.
A)Hoffman is not required to make any accounting adjustments.
B)Hoffman has made a change in accounting principle requiring retrospective adjustment.
C)Hoffman has made a change in accounting principle requiring prospective application.
D)Hoffman needs to correct an accounting error.

Question

Quizplus · Accepted Answer

Switching from LIFO to FIFO is a change in accounting principle, and therefore, Hoffman Co. is required to make a retrospective adjustment to its financial statements. This adjustment requires restating prior period financial statements as if the new accounting principle had always been used.