Companies should be expected to report the impact of changes expected in
subsequent years, especially if they have multiperiod impacts. a While
accounting changes decrease the comparability and consistency of financial
information, such change is inevitable as companies respond to the dynamic
business environment. Accountants need to report these accounting changes in
a way that provides investors, lenders, and other creditors with information
useful in their decision-making processes.
I feel as though the investors would get a better overview of the impact that the
changes have created not only in prior years but the future years of the
financial statements. a This also will give a more honest number of what the
financials should look like for planning. a Financial statements are the stability
and groundwork of a company. a This should be as true as possible to show
growth or loss in a company.
In the article, it states that investors who initially learn of an accounting
change store this information in long-term memory but over time gradually
forget about the change. a This leads to failure to adjust valuation judgments in
subsequent periods. a If they reported in subsequent years, investors would be
able to capture the effects of the accounting changes and make more accurate
evaluations.
I feel that disclosure of multiperiod accounting changes would be useful to
investors and other users. a Clearer and more precise decisions about financial
statements would be beneficial to investors and other users if companies
disclosed accounting changes for subsequent years. a This not only is beneficial
for financial decisions, but for the good of the company itself.
Whalen, J. M., Jones, J. P., & Pagach, D. P. (2017). Intermediate accounting:
Reporting and analysis. Boston, MA: Cengage Learning.
