A change in an accounting estimate is: 1) Reflected in current and future years\

Question

A change in an accounting estimate is: 1) Reflected in current and future years' financial statements, not in prior statements. 2) Not allowed under current accounting rules. 3) Reflected in future financial statements and also requires modification of past statements. 4) Reflected in past financial statements. 5) Considered an error in the financial statements. A change in an accounting estimate is: 1) Reflected in current and future years' financial statements, not in prior statements. 2) Not allowed under current accounting rules. 3) Reflected in future financial statements and also requires modification of past statements. 4) Reflected in past financial statements. 5) Considered an error in the financial statements. A change in an accounting estimate is: 1) Reflected in current and future years' financial statements, not in prior statements. 2) Not allowed under current accounting rules. 3) Reflected in future financial statements and also requires modification of past statements. 4) Reflected in past financial statements. 5) Considered an error in the financial statements.

Explanation / Answer

1) Reflected in current and future years' financial statements, not in prior statements.

Change in accounting estimates occurs when there is some new information that alters the present information. It is one of the ongoing accounting process which reviews current status and future obligations/benefit of liabilities and assets.For example chnge in useful life of a depreciable assets. So change in accounting estimate affects the current as well as future years not past years.

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