When an accounting change is reported under the retrospective approach, prior years' financial statements are:
A) Revised to reflect the use of the new principle.
B) Reported as previously prepared.
C) Left unchanged.
D) Adjusted using prior period adjustment procedures.

Question

Quizplus · Accepted Answer

When an accounting change is reported retrospectively, prior years' financial statements are revised to reflect the use of the new accounting principle. This means that the financial statements for the prior years are adjusted to show what the financial statements would have looked like if the new accounting principle had been used in those years. This is different from a change reported prospectively, where only the current year's financial statements are affected by the new accounting principle.

When an Accounting Change Is Reported Under the Retrospective Approach