Which of the following is true of accounting for changes in estimates?

a. A company recognizes a change in estimate by making a retrospective adjustment to the financial statements

b. Changes in estimates are not carried back to adjust prior years

c. A company accounts for changes in estimates only in the period of change, even though it affects the future periods

d. Changes in estimates are considered as errors or extraordinary items

Question

Business

Olive Webb

24 November, 16:03

Which of the following is true of accounting for changes in estimates?

a. A company recognizes a change in estimate by making a retrospective adjustment to the financial statements

b. Changes in estimates are not carried back to adjust prior years

c. A company accounts for changes in estimates only in the period of change, even though it affects the future periods

d. Changes in estimates are considered as errors or extraordinary items

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Answers (1)

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Dalia Mullen · Answer 1

c. A company accounts for changes in estimates only in the period of change, even though it affects the future periods

Explanation:

A change in the accounting assessment is an adjustment of the carrying amount or related cost of an asset or liability resulting from ensuring the future benefits and liabilities of the asset or liability. Some examples include bad debts and changes in the useful life of a property. The Company's fiscal years end at the end of the year. As with any change in accounting assessment, it can be done in the current or future period. Changes in accounting estimates are not considered accounting errors or exceptional items