Final answer:
The FASB framework involves three types of accounting changes: change in accounting principle, change in accounting estimate, and change in reporting entity, which help ensure consistent and comparable financial information.
Step-by-step explanation:
Types of Accounting Changes
The Financial Accounting Standards Board (FASB) has established a framework for reporting which involves three types of accounting changes: (1) change in accounting principle, (2) change in accounting estimate, and (3) change in reporting entity. A change in accounting principle occurs when an entity adopts a generally accepted accounting principle different from the one it used previously. This could involve a switch from one acceptable method to another. A change in accounting estimate is the result of new information or additional experience and may affect income statement accounts directly, as in the case of a change in the useful life of a depreciable asset. Lastly, a change in reporting entity occurs when there is a change in the entities that comprise the reporting entity, such as a change in subsidiaries included in consolidated financial statements. These changes must be reported in the financial statements in order to provide consistent and comparable financial information over time.