When changing from the average cost method to FIFO, the current year's income includes the cumulative after-tax difference that would have resulted if the company had used FIFO in all prior years.

Question

Quizplus · Accepted Answer

When changing from the average cost method to FIFO, the cumulative effect of the change on prior years' income is reported as an adjustment to the beginning balance of retained earnings in the year of change, not in the current year's income.

When Changing from the Average Cost Method to FIFO, the Current