A change from the equity method to the cost method is a prospective accounting change.

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Switching from the equity method to the cost method is considered a prospective accounting change, meaning the change affects only future financial statements and not past ones. This is because the equity method records the investor's share of the investee's earnings on the investor's income statement, while the cost method records the investment as a fixed cost and the investor only records revenue when they receive dividends or earn proceeds from selling the investment. Switching methods affects how future earnings will be recognized, but not past earnings.

A Change from the Equity Method to the Cost Method