Change in estimate effected by a change in principle

A revised depreciation method reflects a different supported pattern of future benefit consumption. The method is an accounting principle, but the change is inseparable from the revised estimate of that pattern. The result is prospective treatment as an estimate change effected by a principle change.

The file still needs more than arithmetic. Record the carrying amount at the change date, revised pattern and basis, and reason for the change. Add preferability support, remaining life, residual value, the timing convention, and disclosure. It does not recompute prior depreciation with the new method.

Apply the inseparable route

ASC 250-10-45-18 addresses cases in which separating a principle change from an estimate change is difficult. It treats the combined effect as a change in estimate. ASC 250-10-45-19 still requires support that the new principle is preferable.

For example, a machine's revised production pattern may support a move from straight-line to units-of-production depreciation. Use the carrying amount on the change date and the revised future pattern. Do not rebuild depreciation for closed periods merely to show what the new method would have produced.