Which of the following should be reported as a change in accounting estimate?
A) change in the reported beginning inventory amount due to a discovery of a bookkeeping error
B) increase in bad debt rate applied to net sales
C) change from completed-contract method to the percentage-of-completion for revenue recognition
D) change made to comply with a new FASB pronouncement

Question

Quizplus · Accepted Answer

An increase in the bad debt rate applied to net sales is considered a change in accounting estimate. This is because it reflects a revision of an estimate based on new information or new experience. Changes in accounting estimates are recognized prospectively by including them in the income statement of the period of the change and future periods if the change affects both.

Which of the Following Should Be Reported as a Change