Transition Methods for a Change in Accounting Principle
Response to the following problem:
When the FASB issues a new generally accepted accounting principle, it may require companies to apply the new principle prospectively, or to account for the change by the retrospective adjustment method.
Required:
Why do you think that the FASB requires one of two different transition methods when a company adopts a newly required accounting principle? Do you agree with the use of two alternative methods?