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Accounting estimate

An accounting estimate is a monetary amount subject to measurement uncertainty. It uses available information and reasonable assumptions, such as the remaining useful life or residual value used to calculate depreciation. New information may require an estimate to change. A genuine change in estimate affects the current and, where relevant, future periods; it does not by itself mean that earlier financial statements contained an error.

Worked example

A machine has a $24,000 carrying amount, revised residual value of $4,000 and revised remaining useful life of five years. Future annual straight-line depreciation is ($24,000 − $4,000) / 5 = $4,000.

Common mistake

Use the carrying amount at the change date and the remaining useful life. Do not restart depreciation from original cost or automatically rewrite prior-year depreciation.

Where it appears in your exams

QualificationExamRelationshipPeriod
ACCA F1 Supporting July 2027–August 2028
ACCA FA Direct September 2026–June 2027
ACCA FR Direct Official assessment-window verification pending
ACCA K1 Supporting July 2027–August 2028
ACCA SBR Direct Official assessment-window verification pending
FIA FFA Direct September 2026–June 2027

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