When an inventories costing formula is changed, the change is required to be applied:
A) prospectively and the adjustment taken through the current profit or loss.
B) prospectively and the current period adjustment recognised directly in equity.
C) retrospectively and the adjustment taken through the opening balance of retained earnings.
D) retrospectively and the adjustment recognised as an extraordinary gain or loss.

Question

Quizplus · Accepted Answer

Changing an inventory costing formula requires retrospective application, meaning adjustments are made to the opening balance of retained earnings to reflect what the financial statements would have looked like had the new method been used all along. This ensures comparability across periods.

When an Inventories Costing Formula Is Changed, the Change Is