ABC Ltd has discovered that the useful life estimate it made on a material depreciable asset was incorrect.The correct treatment of this event is:
A)treat it as an error and adjust prospectively
B)treat it as an error and adjust retrospectively
C)treat it as a change in an accounting estimate and adjust prospectively
D)treat it as a change in an accounting estimate and adjust retrospectively

Question

Quizplus · Accepted Answer

This situation falls under a change in accounting estimate as the useful life estimate was originally based on the best available information at the time, but new information has come to light that requires a revision of the estimate. Additionally, the adjustment should be made prospectively, as adjusting retrospectively could result in material misstatement of prior period financial statements.

ABC Ltd Has Discovered That the Useful Life Estimate It