When an entity changes its accounting from one generally accepted method to another generally accepted method:

Question

Quizplus · Accepted Answer

When an entity changes its accounting from one generally accepted method to another generally accepted method, the dollar effect of the change on both the balance sheet and income statement must be disclosed to maintain transparency and comparability for users of the financial statements. Option A is incorrect because financial statements of all prior years are not changed, only the current and/or future financial statements are affected by the change. Option B is incorrect because an explanatory note is required, but it does not need to state that the change was approved by the Financial Accounting Standards Board. Option D is incorrect because changes in accounting policies are permitted, as long as they are made in accordance with Generally Accepted Accounting Principles (GAAP).

When an Entity Changes Its Accounting from One Generally Accepted