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Question 6

Expert-verified
Intermediate Accounting (Kieso)
Found in: Page 1305

Short Answer

Define a change in estimate and provide an illustration. When is a change in accounting estimate effected by a change in accounting principle?

An accounting estimate is a simple change in the realizability of an asset or liability. The second part occurs when the change in accounting estimates is inseparable from the effect of related change in principle.

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Step by Step Solution

Definition of change in estimate

The change in estimate is defined as a simple change in how an individual perceives the realizability of an asset or liability—for example, changes in estimates of warranty costs.

Change in accounting estimate affected by the change in accounting principle

This situation occurs when the change in accounting estimates is inseparable from the effect of a related change in accounting principle.

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