GAAP states that if it is impractical to determine the cumulative effect of applying a change in accounting principle to prior periods-such as when a firm adopts the LIFO inventory accounting method-the new accounting principle is to be applied as if the change was made prospectively as of the earliest date practicable.

Question

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This statement accurately reflects the GAAP treatment of changes in accounting principles when it is not practicable to determine their cumulative effect on prior periods. The new principle is applied prospectively from the earliest date practical.

GAAP States That If It Is Impractical to Determine the Cumulative