Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Abercrombie & Fitch Co. is a specialty retail company operating over 1,000 stores globally. The following disclosure note was included in recent financial statements: 4.

Abercrombie & Fitch Co. is a specialty retail company operating over 1,000 stores globally. The following disclosure note was included in recent financial statements: 4. Change in Accounting Principle The Company elected to change its method of accounting for inventory from the retail method to the weighted average cost method effective February 2, 2013. In accordance with generally accepted accounting principles, all periods have been retroactively adjusted to reflect the period-specific effects of the change to the weighted average cost method. The Company believes that accounting under the weighted average cost method is preferable as it better aligns with the Company's focus on realized selling margin and improves the comparability of the Company's financial results with those of its competitors. Additionally, it will improve the matching of cost of goods sold with the related net sales and reflect the acquisition cost of inventory outstanding at each balance sheet date. The cumulative adjustment as of January 30, 2010, was an increase in its inventory of $73.6 million and an increase in retained earnings of $47.3 million. Required: Why does GAAP require Abercrombie to retroactively adjust all prior periods for this type of accounting change?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

QS 9000 Handbook A Guide To Registration And Audit

Authors: Jayanta Bandyopadhyay

1st Edition

157444011X, 978-1574440119

More Books

Students also viewed these Accounting questions