What does change in accounting estimate mean on the CPA exam?
Change in accounting estimate. A revision to an estimate because new information arrived, applied prospectively in the period of change and later periods, never by restating prior statements. A change in depreciation method is a change in estimate effected by a change in principle: prospective, but it still needs a preferability justification.
Defined against ASC 250-10-45-17, 45-18.
Which CPA exam sections use change in accounting estimate?
Change in accounting estimate appears in the FAR section of the CPA exam.
Other terms defined against ASC 250-10
- change in accounting principle: A switch from one acceptable principle to another, allowed only when a new standard requires it or the new principle is preferable.
- prior period adjustment: A correction of a material error in previously issued statements.
Related terms
- information and communication: One of the five components of internal control: how an entity obtains the information it needs and gets it to the people who have to act on it.
- California Consumer Privacy Act: California's consumer privacy statute, as amended by the CPRA.
- information-processing control: A control over processing in an IT application or a manual information process that directly addresses a risk to the integrity of information.
- tolerable misstatement: A monetary amount set so that the risk of the actual misstatement in the population exceeding it is acceptably low.