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When an entity changes its accounting from one generally accepted method to another generally accepted method: financial statements of all prior years must be restated

When an entity changes its accounting from one generally accepted method to another generally accepted method:

  • financial statements of all prior years must be restated to maintain comparability.

  • the dollar effect of the change on both the balance sheet and income statement must be disclosed.

  • accounting changes like this are not permitted.

  • an explanatory note stating that the change was approved by the Financial Accounting Standards Board is required.

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