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+--- Thread: Query regarding change in accounting estimate (/showthread.php?tid=7374)
Query regarding change in accounting estimate - mehwish - 02-09-2010
hi everyone
i have a query regarding change in accounting estimate,it requires prospective treatment i.e change is applied on current year or if it affects future amounts then in future as well while retospective treatment (change in accounting policy or correction of errors} is applied in previous years accounts which are available etc THEN WHY CHANGE IN DEPRECIATION % OR USEFUL LIFE requires cumulative adjustments,we should adjust carrying value only for remaining useful life why we adjust previous year accounts
- cute-doll - 02-10-2010
deprection previous years ki change nai karty jab change in accounting estimate ho. further depreciation new change in usefullife ke mutabik hoti hai
- yasir_live - 02-10-2010
Mehwish Aap ka kya Haal hay ? Konsay Discipline main parh rahi ho ?
Coming to your Query, I think I dont need to Answer further as Cute-Doll is correct in her answer.
Regards.
- sehrish khan - 02-10-2010
but according to gripping IFRS cummulative method is allowed although standard is silent about this method.we can adjust carrying amounts or can also use cummulative method.i have solved the question like this in which asset had 10 years life initial 4 years dep rate was 10% and other 6 years 5% after considering the pattern of consumption management changed its useful life to 8 years and rate 12% in initial 3 years and 7% in next 4 ,this question was solved by cummulative method.
so i would suggest you mehwish not to apply cummulative it may be solved by prospective application ,which is encouraged by ifrs BUT both methods are right
- Dard - 02-10-2010
Mehwish copy paste the question here with dates, NBVs etc. The way you explained it is not clear
- kamranACA - 02-10-2010
Dear
Gripping IFRS is sort of technical reference manual or explanatory material that obviously carries personalized understanding of writer/developer. Personal understandings do vary for so many reasons that can be valid or invalid.
In 2004 and 2005 When depreciation practice was changed from "full year depreciation on additions in first year and nothing on deletions in the year of disposal" and was charged "for actual period of use ie from date/month of addition to date/month of deletion", we saw huge differences of opinion about accounting treatment.
A large circle was of the view that it tentamounts to change in policy and not estimate so treatment should be made retrospectively. Even the people like Muhammad Maqbool expressed similar views in different CPD meetings.
However, on other hand so many professionals (including myself) were of the view that it's a change in estimate so it should be treated prospectively.
Eventually the matter was referred to technical advisory committee of ICAP that after considering all the pros and cons gave its opinion that such change was a change of estimate and it should have been treated as such prospectively.
You can find it in latest few volumes of selected opinions available at the website of ICAP.
In my view there can be made arguments on this topic but prospective application is a precise practice.
Regards,
Kamran.
- mehwish - 02-10-2010
<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by Dard</i>
<br />Mehwish copy paste the question here with dates, NBVs etc. The way you explained it is not clear
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
actually i have no specific question my friend who is in module c(ca) asked me,(she was doing some past papers) i was convincing her that prospective treatment will be applied but she showed me the solution in which previous years accounts were also adjusted.following is the link she told me for that question it is almost same as sehrsh explained
http//www.icap.org.pk/web/links/484/pastexaminationpapers.php
it is under intermediate examination,autumn 2007,Q 2
- mehwish - 02-10-2010
<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by yasir_live</i>
<br />Mehwish Aap ka kya Haal hay ? Konsay Discipline main parh rahi ho ?
Coming to your Query, I think I dont need to Answer further as Cute-Doll is correct in her answer.
Regards.
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
i am mcom student