Approaches to Accounting Changes

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• Retroactive (restatement)
  • Application of the new principle for all periods presented. The effect of the change for prior periods not presented is as an adjustment to the beginning balance of retained earnings for the first year presented. Enhances comparability at the expense of consistency.

• Prospective
  • Change is accounted for in the current and future periods only. No restatement or change in principle.

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