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.
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Hi there, I hope you’re well, I just had a quick question about changes to accounting estimates which occur midway through a reporting period.
Although we’re told that changes are prospective and should not reflect comparative periods, theres no mention of the effect on the prior months of a present reporting period when an estimate is changed.
Suppose I made a change to the useful life or residual value of an asset 6 months (e.g. June) into the financial year, would my change in estimate be reflected only at the time I created the new estimate? Or does the new estimate alter the depreciable amount for the asset starting from the beginning of the year (e.g. January)?
Technically either way we are still meeting the requirement of a prospective change which only influences either the present reporting period, or the present and future reporting periods.
Also, is it unusual for changes in accounting estimates (and policies for that matter) to be made in the middle of a reporting period? Do most changes occur at the end of the year?
Thanks in advance.
Hi,
If the change took place part way through the year then the application of the new estimate would take place from that date. So if this was a change in depreciation method then the first part of the year would be under the old method and the second part of the year under the new method.
It is rare that we see this happen part way through the year but it isn’t beyond the realms of possibility.
Thanks
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Thank you, you never disappoint.
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I appreciate it!
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