Disclosure Requirements
Communicating Accounting Changes
Companies must disclose sufficient information so financial statement users understand the nature, reason, and financial effects of accounting changes.
- Nature of the accounting change.
- Reason the new method is preferable.
- Financial statement impact.
- Effect on income and earnings per share, when applicable.
- Description of prior-period restatements.
Note
Transparent disclosures improve comparability and help users interpret financial statement changes.
Summary
Proper disclosures are required regardless of whether a change is prospective or retrospective.