change in accounting estimates accounting, principles, required, specific, change

mouse123

this is the answer in QBANK:

Changes in asset lives and salvage value are changes in accounting estimates and no specific disclosures are required.

I thought changes in both accounting estimates and principles needs disclosure, am i right?

Siddimaula

thanks for ur reference!

farrukhsadiq

I know this from taking the CPA exam and also from an intermediate accounting book.

Also, it's listed on pg 406 in the CFAI FRA book.

thisisbrianly

Yeah- I came across that question too and it made me scratch my head...let me know if you find out the reason

dontknow1987

@njlevel10610: they didn't specify material or non-material in the question.

i didn't get the part where you said 'A change TO LIFO from any other inventory cost flow assumptions, even though is a change in accounting principle', do they mention it in the CFAI Book? i just went through study notes and don't remember seeing this.

manasib

If the change in estimate is not considered material in the year of change, disclosure is not necassary.

Changes in ordinary accounting estimates (i.e. uncollectible accounts and inventory adjustments), usually made each period do not have to be disclosed unless material.

If it's material, meaning that it will affect future financials, disclosure is necassary.

Did they specify this in the question?

Note: Exceptions to the GR

1) A change TO LIFO from any other inventory cost flow assumptions, even though is a change in accounting principle, is treated as a change in estimate because it's impracticable to estimate (might be an easy point on the exam)

2) change in the method of depr (DDB to SL), amtz, or depletion is now considered both a change in principle and estimate. However, these changes should be accounted for as changes in estimates and are handled prospectively.

3) Changes in acc't principle that are inseparable from a change in estimate (e.g change from installment method to immediate recognition because uncollectable amounts can now be estimated) is treated as a change in estimate and is accounted for prospectively.