Steve Is Quickly Moving Up in the Accounting Department of RAC

question 58

Essay

Steve is quickly moving up in the accounting department of RAC Inc. It is year-end; he has just received news that the estimates of the estimated useful life and savage values were wrong and must be changed. Of course, that changes the depreciation expense and accumulated depreciation. Steve calls his wife to explain why he will be late again. Now is he is pondering a comment his wife made. She said "I'm no accountant; but after four years, you would think that the company could get it right how its estimates affect expenses and the relevant accounts." How might Steve interpret his wife's statement from an ethical perspective in the context of the facts?

---

Definitions:

Revenue Recognition

The accounting principle that outlines the specific conditions under which revenue is recognized and dictates how it should be measured and reported in the financial statements.

Disclosures

Information provided in financial statements and notes that gives insight into the basis of preparation and specific accounting policies, significant judgments, and potential risks.

IAS 1

International Accounting Standard 1, which outlines the presentation of financial statements, aiming for comparability, transparency, and fairness in financial reporting.