During 2013, 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

The change from LIFO to FIFO represents a change in accounting principle. As a result, retrospective adjustment is required to adjust the financial statements of prior years to make them comparable with the current year. Therefore, Hoffman has made a change in accounting principle requiring retrospective adjustment.