Changes in accounting estimates usually have no effect on a company's underlying cash flows.

Question

Quizplus · Accepted Answer

Changes in accounting estimates involve adjusting the values of assets, liabilities, revenues, and expenses to reflect new information or revised assumptions. These adjustments do not involve actual cash flows and therefore do not directly affect a company's underlying cash flows. However, changes in accounting estimates may affect reported profits, which in turn may influence investor perceptions and stock prices, which could indirectly affect a company's cash flows.

Changes in Accounting Estimates Usually Have No Effect on a Company's