If for a class a non-current asset an entity changes from using the sum-of-the-years-digits method to the straight-line method to allocate the depreciable amount, then:
A)the change is applied retrospectively because it is a change in accounting policy
B)the change is applied retrospectively because it must be a correction of a prior period error
C)it is applied prospectively as it is a change in an accounting estimate
D)is not permitted because it will conflict with the method applied in calculating the comparative amounts

Question

Quizplus · Accepted Answer

Changing from the sum-of-the-years-digits method to the straight-line method is a change in accounting estimate and should be applied prospectively. This is because it does not affect the prior period financial statements and only affects future periods. Option A is incorrect because retrospective application is only required for changes in accounting policies. Option B is incorrect because a change in accounting estimates is not a correction of a prior period error. Option D is incorrect because changing the method of depreciation does not conflict with the method used in calculating comparative amounts.

If for a Class a Non-Current Asset an Entity Changes