Question

Which of the following statements is correct? a. Changes in accounting principle are always handled in the current or prospective period. b. Prior statements should be restated for changes in accounting estimates. c. A change from expensing certain costs to capitalizing these costs due to a change in the period benefited, should be handled as a change in accounting estimate. d. Correction of an error related to a prior period should be considered as an adjustment to current year net income.

Answer 1

Answer:

C. A change from expensing certain costs to capitalizing these costs due to a change in the period benefited, should be handled as a change in accounting estimate.

Explanation:

The statement above describes or the other hand talks about expenditure and capitalization.

Therefore, expenditure is explained as either capitalized as a cost of the asset on the company’s balance sheet or it is expensed in the income statement of the incurred period.

Under IFRS, the following rules govern the categorization of the expenditure as an asset:

If the expenditure is expected to give economic benefits in future over several accounting periods.

If one can measure the cost reliably. Also, increases the assets on the company’s balance sheet.

Recorded on the cash flow statement as a cash outflow for investing.