Big Sports Company has been using the FIFO method for the past three years. This period, the company has decided to switch to the LIFO method.

• Keeping the scenario in mind, discuss the reasons why a company might decide to make this change.
• Analyze the effect that the change may have on the financial statements.
• Discuss whether a company should restate the accounting change in the financial data of the prior years to reflect the new method? Or the accounting change should be reflected in the current and future years. Why?
• Does any sort of change in the accounting principle, may result in dilution of public confidence in financial reporting? Why or why not?
• Discuss whether the companies should follow a retroactive or retrospective approach while incorporating an accounting change.
• Sometimes a company cannot retrospectively adjust their statements, even with best efforts and intentions. Discuss what should the company can do in such a situation?

When preparing the periodic physical count for Inventory, Big Sports Company has found some of its inventory has become obsolete. Scoreboards, previously accounted for on the financial statements valued at $500,000, now have a fair market value of $200,000 and they are not expected to recover their value.

• Assess the proper treatment to account for the reduction in value of the scoreboards.
• Evaluate how the disclosure should be treated in this instance.
• Analyze what effect this would have on the financial statements.