[gwigle]

Can anyone straighten this out? Per the book, changes in depreciation method should be handled as changes in estimate, prospectively.

However, this simulation (#21) is saying we need to record the cumulative effect of the change, which sounds like retrospective treatment.

Question:
“Change from double-declining balance depreciation to straight-line depreciation.”

Answer:
“Handled as a change in estimate in form of a change in accounting principle. This circumstance would be reported as a cumulative effect of change in accounting principle. The financial statements are not restated, but the current income statement will include the new annual depreciation for the equipment newly calculated going forward, applying the new method to carrying value.”