Final answer:
Estimates that later prove incorrect are not automatically considered corrections of errors; they are usually changes in estimates due to new information and accounted for differently in financial statements.
Step-by-step explanation:
When it is impossible to differentiate between a change in estimate and the correction of an error, companies should not automatically consider careful estimates that later prove to be incorrect as a correction of an error. The distinction is crucial because a change in estimate is a result of new information or subsequent developments and is accounted for prospectively. Conversely, corrections of errors are a result of discoveries of inaccuracies in the financial statements of prior periods and are treated retrospectively. It is important for the integrity of financial reporting that these concepts are correctly applied.