The financial statements should be adjusted for retrospectively by restating opening retained earnings in the current year’s financial statements.

Although the company will not have sufficient information to adjust individual prior periods, sufficient information should be available to compute the cumulative impact on prior periods, by determining the extent of completion of each contract as at the beginning of the current year.  Hence it would be appropriate to apply the change in policy retrospectively, by making a cumulative adjustment to the opening balance of retained earnings for the current year’s financial statements.