Change in Estimates - Long Term Depreciation - Accounting

The video tutorial explains the basics of depreciation, focusing on how changes in salvage value and useful life affect depreciation calculations. It emphasizes the prospective approach, where only current and future periods are adjusted, without altering past financial statements. The tutorial also highlights the importance of recalculating depreciation expenses based on new estimates and clarifies that changes are reflected only in future financial statements. The next video will provide a detailed guide on implementing these changes.

Which of the following is NOT a factor that depreciation depends on?

• Salvage value

• Useful life

• Market demand

• Tack

When there is a change in salvage value or useful life, what should be done?

• Recalculate depreciation for past periods

• Use new estimates for current and future periods

• Ignore the changes

• Recalculate depreciation for all periods

What does the term 'prospectively' mean in the context of changes in accounting estimates?

• Ignoring changes altogether

• Applying changes to current and future financial statements

• Applying changes to past financial statements

• Applying changes to all financial statements

Which part of the cost is affected by a change in accounting estimates?

• The entire cost

• None of the cost

• Only the cost already depreciated

• Only the undepreciated cost

What is the impact of a change in accounting estimates on past financial statements?

• Past statements must be ignored

• Past statements must be restated

• No impact on past statements

• Past statements must be recalculated