[startupcfo]

Under IFRS, a voluntary change in accounting method is applied:
Retrospectively.
Prospectively.
Currently.
Currently and prospectively.

I’m not sure what “retrospectively” means exactly.

Let’s say that today is March 31st of 2016. You started your company on January 1st 2014. You decide to adopt a change in accounting principal beginning Q2 of the fiscal year. Does your change go back back to Jan 1, 2016? Or does it mean you have to restate the financial statements from 2014 and 2015 as well?

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[Anonymous]

Retrospectively means you adjust the beginning retained earnings in the earliest period presented for the cumulative effect of the change, and, if prior periods are presented (which is required under IRFS), they should be restated… according to my becker book.

My understanding is that if you decide to make a change in accounting principle during the year, then you use the new principle for that whole year, I think. I'm hoping the exam won't ask me how to present a change in accounting principle for interim financials, cause I'm not sure.

Let me know if I'm wrong, but I would update Jan 1, 2015 Balance Sheet column to adjust beginning retained earnings as if you always used the new principle. Then Dec 31, 2015 would be restated using the new principle. Then 2016 would be presented using the new principle. Since IFRS requires 3 balance sheets to be presented: Jan 1, 2015 and Dec 31, 2015 and Dec 31, 2016.

Try this link https://home.kpmg.com/content/dam/kpmg/pdf/2013/03/1-UFRS-IFRS-Illustrative-Financial-Statements-2012.pdf and go to pages 11 and 13 for the comparative IRFS balance sheet with change in accounting policy. See page 19 for statement of changes in equity and you can see the second line is the “Impact of change in accounting policy”, also known as “cumulative effect of accounting change”. That's how much the earliest beginning retained earnings on the Balance Sheet would have needed to be adjusted.

[Author]

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