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Hi Tutor
Changing from no depreciation to depreciation is considered as error correction ?
How to differentiate between the three of the accounting changes?
ThanksI’m not convinced that changing from no depreciation to depreciation is the correction of an error! Who has told you that?
It’s a change in an accounting policy – to depreciate or not to depreciate? That is the question! Whether ’tis nobler in the mind to ….oh never mind about slings and arrows of outrageous fortune!
Change of estimate is where we anticipated that the asset would last for 8 years and now we’re changing our mind (after say 2 years) to thinking that it only has 4 more years left
Error correction – we discovered in April that last year’s figures were materially misstated because of a fraud that had been carried out last year but only discovered this year.
Had we known about it last year, it would have altered last year’s figures. But we didn’t. So now that’s an error correction
Ok?
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