[Givemesleep]

If you change depreciation methods, not useful lives, is this still an estimate change which is current period and prospective?

Reg 11/15/2011 - 80
Aud 02/28/2012 - 81
Bec 05/31/2012 - 78
Far 08/31/2012 - 83 Do you believe in Miracles, YES !!!

CPA License received 10/2012 !!
CFE License received 04/2013 !!
EA License received

Givemesleep

[Mrs 300]

Weird b/c I'm going over this myself.

According to Becker:

“A change in the method of depreciation, amortization, or depletion is considered to be both a change in accounting principle and a change in estimate. These changes should be accounted for as changes in estimate and are handled prospectively. The new depreciation method should be used as of the beginning of the year of the change in estimate and should start w/ the current book value of the underlying asset. No retroactive or retrospective calculations should be made and no adjustment should be made to retained earnings.”

This is considered one of the exceptions to the general rule. The other is a change to lifo.

REG - 80 (Becker only)
BEC - 76 (Becker only)
AUD - 71, 76 (Becker only)
FAR - 65, 74, 81! (Becker, Wiley Test Bank, Ninja notes & Audio)

CPA Class of 2012 🙂

[Givemesleep]

Thanks Mrs300, yep any depreciation change is a change of estimate and is current period and prospective. I am losing my mind this process has made me nutty. By the way the numerator for sum of the years digits is n(n+1) / 2, the numerator is the year of service. Help

Reg 11/15/2011 - 80
Aud 02/28/2012 - 81
Bec 05/31/2012 - 78
Far 08/31/2012 - 83 Do you believe in Miracles, YES !!!

CPA License received 10/2012 !!
CFE License received 04/2013 !!
EA License received

Givemesleep

[Givemesleep]

I meant demonitor is n(n+1) /2.

Reg 11/15/2011 - 80
Aud 02/28/2012 - 81
Bec 05/31/2012 - 78
Far 08/31/2012 - 83 Do you believe in Miracles, YES !!!

CPA License received 10/2012 !!
CFE License received 04/2013 !!
EA License received

Givemesleep

[Mrs 300]

Isn't FAR such a blast? It has killed me for 7 months. I'm ready for it to be out of my life.

Just substitue the estimated useful life for n and that is your denominator for every year that the asset is in service. So if it's a 5 year life, the denominator is 5(5+1)/2 = 15. That's the denominator every year. Becker makes the point that when they test this, it's usually 5 years or less. So, if you're super paranoid, you can just add them up (5+4+3+2+1) instead of using the formula and you'll get the same result.

Hope this is what you're asking!

REG - 80 (Becker only)
BEC - 76 (Becker only)
AUD - 71, 76 (Becker only)
FAR - 65, 74, 81! (Becker, Wiley Test Bank, Ninja notes & Audio)

CPA Class of 2012 🙂

[sacredtheory]

Just remember the caveat to this rule is if you change from a non-GAAP method of depreciation (MACRS) to GAAP, it's considered an error correction and not a change in estimate, and therefore will require restatement of the financials for all periods presented.

BEC: Passed
AUD: Passed
REG: Passed
FAR: Passed

Jared

[Author]

Replies