Management has recently purchased new equipment but is uncertain about its useful life. For the initial year, management estimated a useful life of 10 years. However, due to a major accident during the first year, management is now uncertain about the equipment’s functionality and has revised its estimate to 5 years and included a description of their uncertainty and of this change in estimated useful life in financial statement disclosures. Which of the following is an accurate statement regarding this approach?

Multiple Choice

• Information contains error because management changed its estimates on the useful life of the equipment.

• Information contains error because the useful life of the equipment is uncertain.

• Information is free from error because management has provided enough disclosure regarding the uncertain estimate.

• Information is free from error because management made the correct decision in revising the estimated useful life of the equipment.

Answer rating: 100% (QA)

Solution Information is free from error because management has provided enough disclo... View the full answer