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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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How is a change in depreciation method accounted for? Why?

To determine

Explain the way a change in depreciation method is accounted for, and the reason for such accounting treatment.

Explanation

Accounting changes: When a company requires to sacrifice the consistent accounting methods and procedures, to enhance the usefulness and relevance of the accounting information, those changes are referred to as accounting changes. Such inevitable accounting changes decrease the comparability and consistency of accounting information. The reasons for accounting changes could be new methods introduced by FASB (Financial Accounting Standards Board), changes in accounting principles, and changes in accounting estimates.

Accounting treatment of change in depreciation method: When a company changes or revises an estimate due to additional or new experience, such a change is referred to as change in accounting estimate. A change in accounting estimate like the change in depreciation method, or change in service life of an asset, effects the values of the year in which the change is made, and future period only, but not the previous periods...

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