Video: Changes in Accounting Principle

In this lesson, Nick Palazzolo, CPA, unpacks the ins and outs of making changes in accounting principles, such as shifting between inventory valuation methods or revenue recognition for construction contracts. He clarifies what does not qualify as a change in principle and illustrates the FASB's mandated retrospective approach, which involves restating all prior financial statements. Nick breaks down the intricate process of adjusting the opening balance of retained earnings, and the carrying amounts of assets and liabilities, ensuring that financials across different periods are comparable. He also delves into the essential disclosures required in the financial statement notes, from the nature of the change to its impact on operations and equity, providing insight into the transparency necessary for accurate financial presentation.