Final answer:
When comparative financial statements are presented, a change in accounting entity is reported by restating prior periods' financial statements for the new entity's configuration and including disclosures of the change in the notes to the financial statements.
Step-by-step explanation:
If comparative financial statements are presented and there has been a change in the accounting entity during the current year, this change should be reported by restating the financial statements of all prior periods presented to show financial information for the new reporting entity as if that entity had existed in all prior periods. This method ensures consistency and comparability of financial data over time. If the change involves a significant reorganization, merger, or change in the nature of operations, this would typically be disclosed in the notes to the financial statements, providing transparency to users regarding the effects on comparability.
The disclosure would include a description of the reason for the change in accounting entity, the nature of the restatements made, and their impact on the financial results and position of the company. It is essential to maintain the integrity of financial reporting standards through such disclosures and adjustments, which allow users of the financial statements to make informed decisions.