Question

Which of the following statements is correct?

Select one:
A. Correction of an error related to a prior period should be considered as an adjustment to current year net income.

B. 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 principle.

C. Prior years' financial statements should be restated for changes in reporting entity.

D. Changes in accounting principle are always handled in the current or prospective period.

Answer 1

ANSWER

Correct Option is Option B.

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 principle.

Prior period financial statements should be restated to account the prior period adjustments, it should not be considered as an adjustment to current year net income.

Changes in accounting principle are not always handled in the current or prospective period, they are retrospective too, it effects retrospectively as well.