Accounting Policies, Estimates and Errors Quiz
7 multiple-choice questions with answers and explanations · 5 medium, 2 hard
Changes in accounting policy, changes in accounting estimate and prior-period errors: which is which, and how each is accounted for.
- 1Consistency and Changing PoliciesThe consistency principle means an entity:medium
- 2Change in Accounting Policy vs Estimate — Inventory FormulaA company switches its inventory cost formula from FIFO to weighted-average. Under IAS 8, this is:medium
- 3Theory: Estimate Change vs Accounting PolicyA company changes the estimated useful life of an asset because new information indicates the asset will remain productive longer than originally expected. This is:medium
- 4Spot the Error: Useful-Life Change RestatedA company changes the useful life of an asset because new technical information becomes available. The accountant restates all previous years' depreciation. What is wrong with this treatment?medium
- 5Estimate, Policy, or Error?A company discovers that depreciation was calculated using the wrong formula for the past two years, due to a data-entry mistake rather than new information. Correcting this is:medium
- 6IAS 8 — Change in Useful LifeA company revises the remaining useful life of a machine from 6 years to 3 years. Under IAS 8 this is accounted for as:hard
- 7IAS 8 — When No Standard Specifically AppliesWhen no IFRS specifically applies to a transaction, management develops a policy by considering, in order:hard