Which of the following statements about accounting estimates is true?

Question

Quizplus · Accepted Answer

Accounting estimates are necessary because economic events and transactions are not known with certainty. Estimates may include items such as the useful life of a fixed asset, the amount of bad debt that is likely to occur, or the fair value of an investment. Though estimates are significant and can have a material impact on financial statements, they are inherently uncertain due to the dependencies upon business and economic events that are yet to occur. The accounting estimates are required to be disclosed in the notes to the financial statements, but GAAP does not specifically cover acceptable accounting estimates.

Which of the Following Statements About Accounting Estimates Is True