A company that reports changes retrospectively would
A) report the cumulative effect in the current year's income statement as an irregular item.
B) not change any prior-year financial statements.
C) make changes prospectively.
D) show any cumulative effect of the change as an adjustment to beginning retained earnings of the earliest year presented.

Question

Quizplus · Accepted Answer

Retrospective application involves adjusting the financial statements of prior periods as if the new accounting policy had always been in use. This means that the cumulative effect of the change is adjusted against the beginning retained earnings of the earliest year presented, not reported in the current year's income statement.

A Company That Reports Changes Retrospectively Would