A cumulative effect of a change in an accounting principle is measured as

A) the difference between prior periods' net income under the old method and what would have been reported if the new method had been used in the prior years.
B) the after-tax difference between prior periods' net income under the old method and what would have been reported if the new method had been used in the prior years.
C) the difference between prior periods' net income and current net income under the old method and what would have been reported if the new method had been used in the prior years and the current year.
D) the after-tax difference between prior periods' net income and current net income under the old method and what would have been reported if the new method had been used in the prior years and the current year.

Question

sonal gupta · Accepted Answer

Final Answer : B, Explanation :  The cumulative effect of a change in an accounting principle is measured as the after-tax difference between prior periods' net income under the old method and what would have been reported if the new method had been used in those prior years. This adjustment reflects the impact of the change as if the new method had always been used, adjusted for taxes to provide a clear picture of its effect on the company's financial position.

Definitions

Learning Objectives

Learning Objectives

Related questions