Which of the following statements is correct?
A) Changes in accounting principle are always handled in the current or prospective period.
B) Prior statements should be restated for changes in accounting estimates.
C) A change from expensing certain costs to capitalizing these costs due to a change in the period benefited, should be handled as a change in accounting estimate.
D) Correction of an error related to a prior period should be considered as an adjustment to current year net income.

Question

Quizplus · Accepted Answer

Changes in accounting estimates are handled prospectively, while changes in accounting principles are usually handled retrospectively or prospectively depending on the circumstances. Prior statements should not be restated for changes in accounting estimates but must be restated for changes in accounting principles. Correction of an error related to a prior period should be considered as a restatement of prior period financial statements and not an adjustment to current year net income. Therefore, option C is the correct statement.

Which of the Following Statements Is Correct