I think that in the case of all the scenarios in the text an ethical
company should be expected to report the changes (Wahlen, (2017),
sec. 22-1). a A change in accounting principle could change the amount
in a line item that may be key to investors such as inventory. A change
in estimate could affect future value of a project or equipment that
could affect assets negatively to positively from the original reports. a
Change in reporting entity should be reported because an investor or
lender may not want to deal with the new parent company. a Errors
especially should be reported as soon as possible in order to provide
accurate data to investors and lenders.
While many investors currently make snap decisions based on little
info this is not true of established financial institutions. a Commercial
lenders and investors want accurate information over a longer period
in order to make a proper decision. If items such as inventory and
other assets have been improperly reported over time it will have a
negative impact and may even affect a company's credit rating.
Whalen, J. M., Jones, J. P., & Pagach, D. P. (2017). Intermediate
accounting: Reporting and analysis. Boston, MA: Cengage Learning.
