Management has recently purchased new equipment but is uncertain about its useful life. For the initial year,
Question:
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.
Organizational Behavior Managing People and Organizations
ISBN: 978-1305501393
12th edition
Authors: Ricky W. Griffin, Jean M. Phillips, Stanley M. Gully