Accounting estimates and Policy

Changes in accounting policies is an accounting standard name. Any changes to estimate depreciation ( change policy of depreciation from. Straight line to reducing balance) is Accounting estimates.

@ Mukherjee

It is correct because within the standard, there are three types of policy changes.

1. Retrospective changes

2. Changes to accounting estimates

3. Prior period error

Looking closely at standard’s principles, an estimate is 

“To the extent that a change in an estimate gives rise to changes in assets, liabilities and equity; it should be recognised by adjusting the carrying amount of the related assets, liabilities and equity in the period of change”

Depreciation policy change will change the pattern of consumption of economic benefits and will effect the carrying amounts of the assets. So it is an accounting estimate because, a depreciation policy of the firm is to still write off depreciation to the asset every year, while this change in depreciation policy involves a change in estimate. To simplify,

Accounting policy- Depreciation write off

Accounting Estimate- Changes To Depreciation pattern