Before 2014, Jefferson Corporation properly accounted for its income from long-term construction...

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Before 2014, Jefferson Corporation properly accounted for its income from long-term construction contracts on the completed-contract basis. However, early in 2014 to better measure income earned on their long-term construction contracts and be consistent with their competitors, Jefferson changed to the percentage-of-completion basis. Income for 2014 has been recorded using the percentage-of-completion method. The following information is available for your review: Pretax Income Pretax Income Completed-Contract Percentage-of-Completion Prior to 2014 $330,000 $425, XXXXXXXXXX $105,000 $175,000 a)	Is this a change in accounting principle, a change in accounting estimate or an error in the financial statement?  b)	What is the proper accounting treatment for this situation? Cite the authoritative guidance.

Robert · Accepted Answer

#4 
Before 2014, Jefferson Corporation properly accounted for its income from long-term construction 
contracts on the completed-contract basis. However, early in 2014 to better measure income earned 
on their long-term construction contracts and be consistent with their competitors, Jefferson changed 
to the percentage-of-completion basis. Income for 2014 has been recorded using the percentage-of-
completion method. The following information is available for your review: 
Pretax Income Pretax Income 
Completed-Contract Percentage-of-Completion 
Prior to 2014 $330,000 $425,000 
2014 $105,000 $175,000 
a) Is this a change in accounting principle,

Before 2014, Jefferson Corporation properly accounted for its income from long-term construction contracts on the completed-contract basis. However, early in 2014 to better measure income earned on...

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