Change in Accounting Principle

Switch from one principle to another. An example is changing from the Straight-Line-Depreciation method to the units-of-output method. A change in principle is usually accounted for in the current year's income statement in an account called Cumulative Effect of a Change in Accounting Principle. A few changes in principle require the restatement of previous years' financial statements as if the new principle had been used in those years. An example is going from the LIFO inventory method to another method. Disclosure should be made of the nature and justification for a principle change. Proper justification might be a new FASB pronouncement.