A change in accounting principle that is implemented using the modified retrospective approach includes:
A) implementing the change in the current period only and not adjusting for the cumulative effects on prior periods.
B) applying the new standard to the adoption period only, and recording the cumulative adjustment for prior periods to the current period's beginning balance of retained earnings.
C) restating financial statements of all periods presented as if the new standard had been used in those periods.
D) not accounting for the change in the current period or prior periods.

Question

Quizplus · Accepted Answer

The modified retrospective approach requires applying the new accounting principle to the adoption period and recognizing the cumulative effect of the adjustment in the beginning balance of retained earnings of the period of adoption, while not restating the financial statements of prior periods. Option A is incorrect as it does not adjust for the cumulative effect on prior periods. Option C is incorrect as it involves restating financial statements of all periods presented. Option D is incorrect as it does not account for the change at all.

A Change in Accounting Principle That Is Implemented Using the Modified