Disadvantages of using the retrospective application method do not include which of the following?
A) Numbers must be changed on previously released financial statements.
B) The cost of determining the effect of the change may be greater than the benefits obtained from the increase in comparability.
C) It has possible impacts on contractual arrangements.
D) All financial statements consistently apply the same revenue recognition principles.

Question

Quizplus · Accepted Answer

The retrospective application method involves adjusting past financial statements as if the new accounting policy had always been in use. This ensures consistency in financial reporting over time, which is not a disadvantage but rather an advantage of using this method. Choices A, B, and C highlight potential disadvantages such as the need to alter past financial statements, cost concerns, and impacts on contracts.

Disadvantages of Using the Retrospective Application Method Do Not Include