A company can change to a new accounting principle if management can justify that the change will result in
A)less likelihood of clerical errors.
B)higher net income.
C)lower net income for tax purposes.
D)more relevant information for decision-making.

Question

Quizplus · Accepted Answer

A company can change its accounting principle if the change provides more relevant and reliable information for decision-making purposes. This is in line with the goal of financial reporting to provide useful information to investors, creditors, and other users. Changes made solely for the purpose of manipulating earnings or tax liabilities do not justify a change in accounting principle.

A Company Can Change to a New Accounting Principle If