Question: Various types of accounting changes can affect the financial statements of

Various types of accounting changes can affect the financial statements of a business differently. Assume that the following list describes changes that have a material effect on the financial statements for the current year of your business.
1. A change from the cost-recovery method to the percentage-of-completion method of accounting for long-term construction-type contracts.
2. A change in the estimated useful life of previously recorded fixed assets as a result of newly acquired information.
3. A change from deferring and amortizing preproduction costs to recording such costs as an expense when incurred because future benefits of the costs have become doubtful. The new accounting method was adopted in recognition of the change in estimated future benefits.
4. A change from including the employer share of taxes with payroll tax expenses to including it with “Retirement benefits” on the income statement.
5. Correction of a mathematical error in inventory pricing made in a prior period.
6. A change in the method of accounting for leases for tax purposes to conform with the financial accounting method. As a result, both deferred and current taxes payable changed substantially.
7. A change from the FIFO method of inventory pricing to the average cost method of inventory pricing.

Identify the type of change that is described in each item above and indicate whether the prior year’s financial statements should be retrospectively applied or restated when presented in comparative form with the current year’s financial statements.

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