Final answer:
A change in accounting principle can be either voluntary or mandatory.
Step-by-step explanation:
A change in accounting principle can be either voluntary or mandatory. This statement is true. A voluntary change in accounting principle occurs when a company decides to adopt a new accounting method or principle on its own. For example, a company may choose to switch from the FIFO (First-In, First-Out) method to the LIFO (Last-In, First-Out) method for valuing inventory.
On the other hand, a mandatory change in accounting principle is required by a regulatory body or accounting standard. For instance, if a new accounting standard is introduced that requires companies to recognize lease liabilities on their balance sheets, all affected companies must comply with this change.
A change in accounting principle can indeed be either voluntary or mandatory. A voluntary change occurs when a company decides that an alternative accounting principle is more appropriate for its financial statements. A change could be influenced by a desire for more accurate representation of financial performance or financial position.
On the other hand, a mandatory change happens when new accounting standards are issued by standard-setting bodies, which require companies to alter their accounting methods to comply with the new rules. In both cases, companies are required to disclose the nature and the reason for the change, as well as the effect on the financial statements.