ASPE 1506 - Accounting Changes

Question 1

Accounting changes – change in estimate (ASPE)

Answer 1

• The use of reasonable estimates is an essential part of the preparation of financial statements and does not undermine their reliability
• An estimate may need revision if changes occur in the circumstances on which the estimate was based or as a result of new information or more experience
• By its nature, the revision of an estimate does not relate to prior periods and is not the correction of an error.
• The effect of a change in an accounting estimate is recognized prospectively by including it in net income in:
  o the period of the change, if the change affects that period only; or
  o the period of the change and future periods, if the change affects both.

Reference: ASPE 1506.20 - .23