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CSEET · Fundamentals of Accounting · Depreciation and Amortization

According to AS 10, how should a change in the depreciation method, made because the expected pattern of consumption of the asset's future economic benefits has significantly changed, be accounted for?

A change in depreciation method made because the expected pattern of consumption of future economic benefits has significantly changed is accounted for as a change in an accounting estimate in accordance with AS 5. It is not treated as a prior period error.

  1. AAs a prior period error corrected retrospectively
  2. BAs a change in an accounting estimate in accordance with AS 5Correct
  3. CAs a revaluation of the asset
  4. DAs a change that is not permitted in any circumstance

Explanation

AS 10 requires the method to be reviewed at least at each financial year-end. If there is a significant change in the expected pattern of consumption, the method is changed and the change is accounted for as a change in an accounting estimate under AS 5. It is not treated as an error.

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