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ACCA Applied Skills · Financial Reporting · Regulatory framework

Which of the following is a change in accounting estimate, rather than a change in accounting policy or a prior period error, under IAS 8?

Revising a machine's remaining useful life from eight years to five because of new information is a change in accounting estimate, applied prospectively. The other options are changes in accounting policy or the correction of a prior period error, which are dealt with retrospectively.

  1. AMoving from the cost model to the revaluation model for property
  2. BCorrecting the omission of a depreciation charge in the prior year's financial statements caused by a calculation mistake
  3. CRevising the remaining useful life of a machine from eight years to five years following new information about technological changeCorrect
  4. DChanging from capitalising development costs to expensing them where the entity now believes this gives more reliable information

Explanation

Revising a useful life results from new information and is a change in estimate, applied prospectively in the current and future periods. Moving from cost to revaluation model and changing the treatment of development costs are policy changes. Omitting depreciation because of a calculation mistake is a prior period error corrected retrospectively.

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