Retrospective application

Retrospective application rebuilds the comparative story. Direct effects before the earliest period presented adjust opening assets, liabilities, and retained earnings or another appropriate equity component. Direct effects within each presented period revise that period's statements and per-share amounts.

The workpaper therefore needs more than one cumulative number:

pre-earliest direct effects, net of tax -> opening equity
earliest-period direct effects          -> earliest comparative columns
later comparative direct effects        -> later comparative columns
current-period direct effects            -> current columns

Indirect cash-flow consequences are recognized when incurred. The bridge must tie across the income statement, balance sheet, equity, cash flow statement, and note rather than stopping when the opening entry balances.

Apply the principle as though it had always been used

ASC 250-10-45-5 defines the comparative mechanics: adjust prior periods for the period-specific effects and place earlier cumulative effects in opening balances of the earliest period presented. ASC 250-10-45-8 limits that reconstruction to direct effects.

Suppose Year 2 and Year 3 are displayed. A $90,000 after-tax effect from earlier years enters opening Year 2 equity. Year 2 and Year 3 direct effects remain in their own income, balance-sheet, equity, and EPS columns. That partition preserves trends and prevents double counting.