Question

A manufacturing company acquired a specialized machine for ₹10,00,000 with an original estimated useful life of 10 years and zero residual value. After exactly 3 years of using the Straight-Line Method (SL

Q: Answer-A manufacturing company acquired a specialized machine for ₹10,00,000 with an original est...

Revisions in useful life, residual value, or the expected pattern of consumption of future economic benefits are classified as Changes in Accounting Estimates , not policies or errors. Under Ind AS 8 , changes in estimates are always handled prospectively . This means the company does not fix the past but only adjust the current and future periods. The future depreciation calculation will be done as follows Cost 10,00,000 Depreciation for 3 years already applied as per SLM 10,00,0001033,00,000 Carrying Amount at end of Yr 3 10,00,0003,00,0007,00,000 New Total Life 12 years Remaining Life 12 New Total 3 Years Lapsed Years Future Impact For Year 4 onwards, the annual depreciation will be 7,00,0009 77,778 instead of 1 lakh earlier

M of depreciation, the technical team determines that due to superior maintenance, the machine's total useful life should be 12 years from the date of acquisition. As per accounting standards, how should this be handled?

A It is a change in Accounting Policy and must be applied retrospectively, restating the depreciation for the past 3 years.

B It is a Prior Period Error and the opening balance of Retained Earnings must be adjusted to reflect the lower depreciation.

C It is a change in Accounting Estimate and the carrying amount at the end of Year 3 should be depreciated over the remaining 9 years.

D It is a change in Accounting Estimate and the carrying amount at the end of Year 3 should be depreciated over the remaining 12 years.

E The change should be ignored until the end of the original 10-year term to maintain consistency in financial reporting.

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A manufacturing company acquired a specialized machine for ₹10,00,000 with an original estimated useful life of 10 years and zero residual value. After exactly 3 years of using the Straight-Line Method (SL

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