Accounting Estimate

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• Change in accounting estimate

  • Treatment is prospective only, that is the change is taken into account in the current and future periods only.
  • No restatement or cumulative effect taken. No dramatic changes!!
  • There is a recognition that accounting necessarily uses estimates.
    For example:
    

Equipment that was bought on 1/1/x1

Cost $80,000

$5,000 salvage value

5 year life

Depreciated on a straight-line basis.

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