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CS Executive · Corporate Accounting and Financial Management · Introduction to Accounting

Ind AS 8 deals with accounting policies, changes in accounting estimates and errors. Which of the following is treated as a change in accounting estimate rather than a change in accounting policy?

Revising a machine's useful life from 10 to 8 years is a change in accounting estimate because it reflects new information about expected benefits and is applied prospectively. Changing the inventory formula or measurement model is a policy change, and omitted depreciation is a prior period error.

  1. ASwitching from the weighted average cost formula to FIFO for inventory
  2. BRevising the useful life of a machine from 10 years to 8 years based on new technical assessmentCorrect
  3. CCorrecting the omission of depreciation on a building in the previous year
  4. DMoving from the cost model to the revaluation model for a class of property, plant and equipment

Explanation

A revision of useful life arises from new information about expected future benefits and is a change in estimate, applied prospectively. Changing the inventory cost formula is a change in policy. Omitting depreciation last year is a prior period error, and changing the measurement model is a policy change.

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