Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281



Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem

When the FASB issues a new generally accepted accounting principle, it may require companies to apply the new principle prospectively, or to account for the change by the retrospective adjustment method.


Why do you think that the FASB requires one of two different transition methods when a company adopts a newly required accounting principle? Do you agree with the use of two alternative methods?

To determine

Explain the reasons to report the newly adopted change in accounting principle by any of the transition methods, as required by Financial Accounting Standards Board (FASB).


Change in an accounting principle: This change occurs when a company decides to change from an accounting principle to another, like change from LIFO to FIFO. A change in accounting principle effects the values that impact the figures of previous and current years, thus, impairs the consistency and comparability. Hence, the changes in accounting principle should be adjusted with a retrospective effect to impact the previous financial statements, to increase the comparability and the consistency of the values between the previous and current accounting periods.


  • When a company implements a new principle due to new changes introduced by FASB, it is mandatory to implement that change in accounting standards as it becomes preferable over the old method...

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Additional Business Solutions

Find more solutions based on key concepts

Show solutions add

What is venture capital? An angel investor? A private placement?

Foundations of Business (MindTap Course List)

How are project classifications used in the capital budgeting process?

Fundamentals of Financial Management (MindTap Course List)

What is a relation? What is a tuple?

Accounting Information Systems

What method of accounting for uncollectible accounts is generally required for financial reporting purposes?

College Accounting, Chapters 1-27 (New in Accounting from Heintz and Parry)

Suppose a new process was developed that could be used to make oil out of seawater. The equipment required is q...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)