Which of the following is a change in estimate?
A)A change from the full costing method in the extractive industries.
B)A change from percentage-of-completion to the completed contract method.
C)Consolidating a subsidiary for the first time.
D)A change in the termination rate of employees under a pension plan.

Question

Quizplus · Accepted Answer

A change in the termination rate of employees under a pension plan is a change in estimate. This is because it involves a revision of assumptions about the rate at which employees will terminate their employment and hence stop accruing pension benefits. The other choices do not involve a change in estimate. A change from the full costing method to another costing method, for example, is a change in accounting policy. Consolidating a subsidiary for the first time is a business combination and requires the use of the acquisition method of accounting. A change from percentage-of-completion method to the completed contract method is a change in accounting principle.

Which of the Following Is a Change in Estimate