Retrospective application definition
/What is Retrospective Application?
A retrospective application is the application of a new accounting principle as if that principle had always been applied. The concept is used when the financial statements for multiple periods are being presented. With the retrospective application of accounting principles, the information presented in multi-period financial statements is more comparable. There is no need to impose a retrospective application on financial statements that are earlier than the ones being included in a set of financial statements.
In situations where retrospective application is required, it usually involves an adjustment to the beginning balances of the applicable asset, liability, or equity accounts presented in the financial statements. However, there are practical limitations on this concept that may allow you to avoid making a full retrospective application of an accounting principle.