Final answer:
In non-comparative Financial Statements, the cumulative effect of a change in accounting principle is recognized in the opening balance of retained earnings in the year of change. Prior periods are not restated, and disclosures about the nature and impact of the change are provided if the change is material.
Step-by-step explanation:
When non-comparative Financial Statements (FS) are presented and there is a change in accounting principle, the cumulative effect of the change is required to be recognized in the opening balance of retained earnings in the year of change. This means that the financial statements for the year will reflect the application of the new accounting principle as if it had been in place all along, and any adjustments required to transition from the old principle to the new one will be accounted for in the opening balance, without restating prior period financial statements.
The cumulative effect adjustment is typically reported in the statement of shareholders' equity or the statement of retained earnings. Entities should also provide disclosure about the nature of the change, the reason for the change, and the effect of the change on income from continuing operations, net income, and related per-share amounts for the current period, if the change is material.