Final answer:
If a company changes its inventory valuation method, the effect on net profit should be disclosed in the financial statements. The correct option is A.
Step-by-step explanation:
If a company changes its inventory valuation method, the effect of the change on net profit should be disclosed in the financial statements. This is because the inventory valuation method directly affects the cost of goods sold and, consequently, the net profit of the company. By disclosing the effect of the change, the company provides transparency and allows stakeholders to have a better understanding of its financial performance.
For example, if a company switches from the LIFO (last-in, first-out) method to the FIFO (first-in, first-out) method, it may result in a different valuation of the inventory and therefore a different calculation of the cost of goods sold. This, in turn, can affect the net profit reported in the financial statements.