Document ID: chunk:federal_register_of_legislation:F2021L00471:body:0:p6
Version: federal_register_of_legislation:F2021L00471
Segment Type: other
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Character Range: 14503–17449

are monetary amounts in financial statements that are subject to measurement uncertainty.
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A change in accounting estimate is an adjustment of the carrying amount of an asset or a liability, or the amount of the periodic consumption of an asset, that results from the assessment of the present status of, and expected future benefits and obligations associated with, assets and liabilities. Changes in accounting estimates result from new information or new developments and, accordingly, are not corrections of errors.
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Accounting Changes in accounting estimates
32 An accounting policy may require items in financial statements to be measured in a way that involves measurement uncertainty – that is, the accounting policy may require such items to be measured at monetary amounts that cannot be observed directly and must instead be estimated. In such a case, an entity develops an accounting estimate to achieve the objective set out by the accounting policy. As a result of the uncertainties inherent in business activities, many items in financial statements cannot be measured with precision but can only be estimated. Developing accounting estimates involves the use of judgements or assumptions Estimation involves judgements based on the latest available, reliable information. Examples of accounting estimates include For example, estimates may be required of:
(a) a loss allowance for expected credit losses, applying AASB 9 Financial Instruments bad debts;
(b) the net realisable value of an item of inventory, applying AASB 102 Inventories inventory obsolescence;
(c) the fair value of an asset or liability, applying AASB 13 Fair Value Measurement financial assets or financial liabilities;
(d) the depreciation expense for an item of property, plant and equipment, applying AASB 116 the useful lives of, or expected pattern of consumption of the future economic benefits embodied in, depreciable assets; and
(e) a provision for warranty obligations, applying AASB 137 Provisions, Contingent Liabilities and Contingent Assets.
32A An entity uses measurement techniques and inputs to develop an accounting estimate. Measurement techniques include estimation techniques (for example, techniques used to measure a loss allowance for expected credit losses applying AASB 9) and valuation techniques (for example, techniques used to measure the fair value of an asset or liability applying AASB 13).
32B The term 'estimate' in Australian Accounting Standards sometimes refers to an estimate that is not an accounting estimate as defined in this Standard. For example, it sometimes refers to an input used in developing accounting estimates.
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Changes in accounting estimates
34 An entity may need to change an accounting estimate may need revision if changes occur in the circumstances on which the accounting estimate was based or as a result of new information, new developments or more experience. By its nature, a change in an