Question

Which of the following is (are) the proper time period(s) to record the effects of a change in accounting estimate? Current period and retrospectively Current period only Retrospectively only Current period and prospectively

Answer 1

Current period and prospectively

Step-by-step explanation:

A change in accounting estimate is a term that describes a modification or change in carrying amount of an asset or liability, or similar financial expense, which occurs from re-analyzing the estimated future benefits and oblig­a­tions that is attached with that asset or liability.

However, to carry out Changes in accounting estimates, the process has to be recognized prospec­tively by including it in profit or loss in the following ways:

1. the period of the change, if the change has effects on the period only, or

2. the period of the change and future periods, if the change affects both periods.

Hence, the proper time period, to record the effect of a change in accounting estimates is Current Period and Prospectively.

Answer 2

Retrospectively only

Step-by-step explanation:

Changes in accounting estimate is applied in selecting and applying accounting policies, accounting for changes in estimates and reflecting corrections of prior period errors.

Accounting estimates are the estimations used by management to recognize amounts in the financial statements where precise values cannot be determined.

Where an accounting estimate has to be revised based on information that was already available at the time of preparation of prior period financial statements, the effect of revision must be recognized retrospectively as it constitutes a correction of prior period error.