The mandatory adoption of a new accounting principle as a result of a new FASB statement requires
A)footnote disclosure only
B)a cumulative effect adjustment
C)retrospective adjustment
D)prospective restatement

Question

Quizplus · Accepted Answer

A mandatory adoption of a new accounting principle as a result of a new FASB statement requires retrospective adjustment, which means that the financial statements for prior periods should be adjusted to reflect the new principle. This is different from a prospective restatement, which would only apply the new principle going forward. A cumulative effect adjustment would only be necessary if the new principle had a material impact on the financial statements that could not be reflected through retrospective adjustment. Footnote disclosure may also be required, but it would not be the only requirement.

The Mandatory Adoption of a New Accounting Principle as a Result