If a company changes its inventory valuation method the effect of the change on net income should be disclosed in the financial statements.

Inventory Valuation Method

The approach a company uses to determine the cost of its inventory, affecting the cost of goods sold and profitability; common methods include FIFO, LIFO, and weighted average.

Financial Statements

Formal reports detailing the financial activities and condition of a business, including the balance sheet, income statement, and cash flow statement.

Net Income

The total earnings of a company after subtracting all expenses, including taxes and operating costs.