Changes to Accounting Methods
Response to the following problem:
Gulag Industries made a number of changes to its accounting system in 2012, which resulted in significant changes to the way the company costs its products. The company adopted new techniques for quality control (including business process re-engineering) and new allocation methods for costing (including activity-based costing). None of the changes the company made to its accounting systems needed to be reported to external stakeholders.
a. What might have motivated Gulag to change its accounting system?
b. Why was it not necessary to report these changes to external stakeholders?