CAF-1 · Chapter 3 · Question 3 of 15
The management of Theta Ltd decides to change the depreciation method of its factory equipment from the straight-line method to the reducing balance method to better reflect the pattern of consumption. How should this accounting change be applied?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Prospectively, as a change in accounting estimate.
Explanation
A change in the depreciation method reflects a change in the estimated pattern of consumption of the future economic benefits embodied in the asset. Under IAS 8, this is accounted for prospectively as a change in an accounting estimate.
More IAS 16 Property, Plant and Equipment MCQs
- Q5When an item of property, plant, and equipment is initially recognized, how should it be measured?
- Q6Which of the following costs is explicitly EXCLUDED from the cost of an item of PPE?
- Q7If an entity acquires a new asset in exchange for an old asset, and the transaction has commercial substance, how is the new asset measured?
- Q8How should an entity account for a major inspection or overhaul of an item of PPE?
- Q9Under the revaluation model, how frequently should revaluations be made?