Final answer:
The cumulative effect approach in accounting is suitable when prior-period financials are restated, a specific standard mandates it, or if retrospective restatement is impractical, and it's not chosen based on improving the bottom line.
Step-by-step explanation:
The cumulative effect approach is allowed in accounting when there is a change in an accounting principle, but several conditions have to be met before implementing this approach. It is permissible if all prior-period financial statements are restated, if a particular standard specifies that it should be used, or if retrospective restatement is not practicable. Importantly, the decision to apply the cumulative effect approach should not be made on the grounds of whether it would result in a more positive bottom line for the firm; the changes should reflect the economic reality of the transactions in a manner consistent with the new accounting principle being adopted.