Write a research paper on Why Companies Change Accounting PrinciplesRespones:There are several different types of accounting changes. They include change in accounting principle, change in accounting estimate, change in reporting entity, and also error corrections. Accounting principle changes are from one generally accepted accounting principle to another. A change in accounting estimate is a revision of an estimate due to new information or experience. A reporting entity change is going from one type of entity to another. Error corrections is caused by a transaction being recorded incorrectly or not at all. A change in accounting principle is a change that would cause a company to change a previously reported inventory amount. For instance, if the company goes from the LIFO inventory method to the FIFO inventory method this change would affect the inventory numbers reported. All accounting changes are not handled the same. Changes in accounting principle and changes in reporting should be accounted for retrospectively. Changes in accounting estimates should be accounted for prospectively. Errors correction depends on the period they are recovered in and if comparative statements. At one of my previous employers, we did what they called cycle counts often. On many occasions we would find numbers that were not correct and have to make adjustments. I was not involved in reporting the financials at the time, but I assume they were having to go back and make the necessary changes based on the information we found.Additional Information:In a recent annual report, J.M. Smucker, changed a previously reported inventory amount of $52 million to $54 million. How can an accounting change cause a company to increase a previously reported inventory amount? Are all accounting changes reported this way? If not, what are the other approaches to reporting accounting changes and provide an example for each.
