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    Question

    A company changed its depreciation method from

    straight-line to diminishing balance, stating this better reflects usage pattern. The change led to material reduction in profit. How should the change be accounted for?
    A As a prior period item Correct Answer Incorrect Answer
    B Prospectively, with disclosure Correct Answer Incorrect Answer
    C Retrospectively Correct Answer Incorrect Answer
    D Adjusted through reserves Correct Answer Incorrect Answer

    Solution

    Change in depreciation method is a change in accounting estimate. As per Ind AS 8, it is accounted for prospectively with adequate disclosure of the reasons and effects.

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