Practice prompt · Q:financial-reporting-environment-and-framework/changed-estimate-decisions-001

Identify which decisions change with a new estimate

Decide whether new operating evidence changes the accounting unit, opening amount, later measurement, or more than one decision.

Updated Sep 20, 2026 Review due Nov 20, 2026

Practice

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Northline still owns and uses the machine from the worked example. At the end of the first year, new operating conditions cause management to shorten its estimate of the machine's remaining useful life. Assume the original cost and ready-for-use date were correct, the machine remains one unit of account, and no impairment or disposal condition exists.

Which answer correctly identifies what changes and what stays the same?

Choose the best answer. A Revise subsequent measurement for the current and later periods; keep the supported unit, recognition, and original cost unchanged. B Replace the machine's original cost with its current selling price because every new estimate requires remeasurement at fair value. C Derecognize the machine and recognize a new asset because the remaining service period changed. D Restate the acquisition-date amount because later evidence always proves that the initial measurement was wrong.

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Answer: A

Choice A. Recompute depreciation prospectively under the applicable guidance using the revised remaining useful life. Preserve the supported unit of account, recognition conclusion, and original cost. Then evaluate any related presentation and disclosure requirements.