The cumulative effect on prior years' earnings of a change in accounting principle should be reported separately as an adjustment to retained earnings for the earliest period presented for all of the following changes except
A) completed-contract method of accounting for long-term construction-type contracts to the percentage-of-completion method.
B) percentage-of-completion method of accounting for long-term construction-type contracts to the completed-contract method.
C) FIFO method of inventory pricing to LIFO method.
D) LIFO method of inventory pricing to the weighted-average method.

Question

Quizplus · Accepted Answer

Changes in accounting principles generally require retrospective application and adjustments to retained earnings for the earliest period presented. However, a change from FIFO to LIFO is an exception where the change is applied prospectively due to the impracticality of determining historical LIFO layers.

The Cumulative Effect on Prior Years' Earnings of a Change