Which of the following is true of accounting for changes in estimates?
A) A company recognizes a change in estimate by making a retrospective adjustment to the financial statements
B) A company accounts for changes in estimates only in the period of change, even though it affects the future periods
C) Changes in estimates are not carried back to adjust prior years
D) Changes in estimates are considered as errors or extraordinary items

Question

Quizplus · Accepted Answer

Changes in estimates are accounted for prospectively, meaning they are recognized in the period of change and future periods if the change affects both. They do not require adjustments to prior periods' financial statements, distinguishing them from errors or extraordinary items.

Which of the Following Is True of Accounting for Changes