DRS Corporation changed the way it depreciates its computers from the sum-of-the-year’s-digits method to the straight-line method beginning January 1, 2016. DRS also changed its estimated residual value used in computing depreciation for its office building. At the end of 2016, DRS changed the specific subsidiaries constituting the group of companies for which its consolidated financial statements are prepared. Required: 1. For each accounting change DRS undertook, indicate the type of change and how DRS should report the change. Be specific. 2. Why should companies disclose changes in accounting principles?

Question

DRS Corporation changed the way it depreciates its computers from the sum-of-the-year’s-digits method to the straight-line method beginning January 1, 2016. DRS also changed its estimated residual value used in computing depreciation for its office building. At the end of 2016, DRS changed the specific subsidiaries constituting the group of companies for which its consolidated financial statements are prepared. Required: 1. For each accounting change DRS undertook, indicate the type of change and how DRS should report the change. Be specific. 2. Why should companies disclose changes in accounting principles?

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