If an accounting change has no material effect on the financial statements in the current year, but the change is reasonably certain to have a material effect in later years, the change should be:

Question

Quizplus · Accepted Answer

Choice "B" is correct. If an accounting change does not have a material effect on the FS of the current year, it will be disclosed in the notes to the FS for the current year, but no modification of the auditor's report is necessary. Choices "A" and "C" are incorrect. If the change in accounting principle were material for the current year, it would be treated as a consistency modification in the auditor's report for the current year. Since there is no material effect in the current year, no modification to the auditor's report is required. Choice "D" is incorrect. A change in accounting principle is not a "subsequent event."

If an Accounting Change Has No Material Effect on the Financial