Effective date is fiscal years beginning after December 15, 2005. "Retrospectivity" relates to errors corrections and errors made.
Why did they make this change? The rest of the world does things this way is the answer we are given. Sadly, the old principal of doing what is right or makes since for some other principal of accounting like conservatism or comparability takes a back seat to the new main principal of accounting: does the rest of the world do things this way?
Sitting at the top of the conceptual framework of accounting is the overriding most important principal: "Does International Financial Reporting Standards (IFRS) do it this way? Simply stated this is IFRS invading GAAP. An additional aspect of this is that the strategy for getting IFRS passed en masse was a failure, now the Financial Accounting Standards Board (FASB) intends to get the IFRS provisions passed piecemeal by makeing IFRS GAAP one small piece at a time.
As an example we can use depreciation to explain a change in estimate, change in principal, or correction of an error. A change in the useful life is a good example of a change in estimate. A voluntary change in the method of depreciation is an example of a voluntary change in accounting principal. A change in the basis of a depreciated asset is considered a correction of an error. There is actually a fourth circumstance that FASB ASC 250 covers. A change in accounting pronouncement where the pronouncement has no specific transition provisions is covered by FASB ASC 250.
Under FASB ASC 250 in fiscal years following December 31, 2005, retrospective application of a change in accounting principal are required to be "applied to the balance of assets and liabilities as of the beginning of the earliest period for which retrospective application is practicable." Underline the word practicable. The corresponding adjustment to the assets and liabilities is a change in the retained earnings or other appropriate components of equity or net assets. Underline appropriate.
After determining if this appropriate change is practicable and and finding that it is impracticable the statement requires that the new principal be "adopted prospectively from the earliest date practicable." Underline practicable.
The real hitch to this entire change is what assets, liabilities and equity are appropriate, and what is the definition of practicable and impracticable and what are the impacts on the elements of practicable, appropriate, inappropriate, and impracticable on the actual numbers within the financial statement.
I constantly remind my accounting students to ignore the rhetoric until you see the applications of the numbers within examples, exhibits, exercises and problems. Then go back and review the rhetoric in the light of the actual numbers. While this is a summary of FASB ASO 250 without sufficient calculations of numbers and journal entries to explain this, the rhetoric tells us virtually nothing.