If a company changes the method it uses to compute the allowance for uncollectible accounts receivable because more recent information has become available,how is this change in method is accounted for?
A) The change is only reported in the current period in which the change is made
B) The change is reported in all future periods affected by the change
C) Previously issued financial statements are not adjusted by the change
D) All of the above are correct ways to account for the change

Question

Quizplus · Accepted Answer

When a company changes the method it uses to compute the allowance for uncollectible accounts receivable, it needs to apply the new method in the current period and all future periods affected by the change. Additionally, it needs to disclose the change in its financial statements, including the reasons for the change, the impact of the change on income, and any other relevant information. The previously issued financial statements are not adjusted by the change, but the company may need to include an explanation in the notes to the financial statements to help users understand the impact of the change on prior periods. Therefore, all options provided in the question are correct ways to account for the change.

If a Company Changes the Method It Uses to Compute