CHANGE IN ACCOUNTING PRINCIPLE

A change that is not trivial in nature, as it is a change in the Implementing of a generally accepted accounting principle different from the one formerly used. In business a company can often select from two or more accepted accounting principles, reporting the changes as an adjustment to the retained earnings’ opening balance for the earliest accounting period presented . However, if multiple changes in principle are made, the previous years’ financial statements must be revised to show what that information would be with the new principles in use. The purpose and justifications for any principle change must be disclosed. An example of a change in accounting principles is changing inventory systems, from FIFO basis to another inventory system.

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