A change in an accounting estimate is:
A) Reflected in future financial statements and also requires modification of past statements.
B) Not allowed under current accounting rules.
C) Reflected in current and future years' financial statements, not in prior statements.
D) Considered an error in the financial statements.
E) Reflected in past financial statements.

Question

Quizplus · Accepted Answer

A change in an accounting estimate is reflected in current and future years' financial statements, not in prior statements. This is because accounting estimates are based on the best available information at the time the estimate is made, and if new information becomes available or circumstances change, the estimate may need to be revised. However, past financial statements cannot be changed, so the revision is only reflected in the current and future statements.

A Change in an Accounting Estimate Is