Which factor necessitates a retrospective change in accounting principles?

A retrospective change in accounting principles is required when a company adopts a new accounting principle that is preferable or more commonly accepted in the industry. This is important as it allows for comparability of financial statements across different periods, ensuring that users can assess the company's financial performance and position consistently.

In the context of industry practices, if a company chooses to change its accounting principles to align more closely with what is considered standard or preferable in its industry, it must apply that new principle retrospectively. This adjustment provides a clearer picture of how the company has performed over time under the new accounting framework, making it easier to compare past performance with current performance following the change.

Using a retrospective approach ensures that all prior financial statements are adjusted as if the new principle had always been in place. This aids stakeholders like investors, analysts, and regulators in better understanding the implications of the change and helps maintain confidence in the comparability and reliability of the company's financial reporting.