For each numbered item below, match the letter from the following list, which best describes the proper treatment of the item on the financial statements. 

A. Adjust the current and future financial statements to reflect the new information. Make no correction of past year’s information (e.g. Change in Accounting Estimate). 

B. Correct the financial statements of all prior years presented and adjust the beginning balance of retained earnings (net of tax) to correct for all mistakes, oversights, unintentional errors, or misuse of facts. (e.g. Prior Period Adjustment) 

C. Restate the financial statements of all prior periods presented under the new basis, and adjust beginning retained earnings of the earliest year presented, if the change affected years prior to those presented. (i.e. Change in Accounting Principle, Retroactive Approach) 

D. Restate financial statements of prior periods presented, as if the new accounting entity had existed all along. (i.e. Change in Accounting Entity)

Answer rating: 100% (QA)

1 B Correct the financial statements of all prior years presented and adjust the beginning balance of retained earnings net of tax to correct for all ... View the full answer