Question

Change in accounting policy disclosure ABC Ltd bought equipment for R100,000.00 on the 1st of January 2023. On this date, the useful life of the equipment was determined to 20 years. The accounting policy stated that equipment was to be depreciated over its useful life using the straight-line method with a R0 residual value. During the 2024 year, management decided that a more appropriate approach to would be to depreciate the equipment using the diminishing value of 10% with a residual value of R10,000. The tax rate for both years is 30%. The SARS wear and tear rate is 5% Required: Discuss whether this is a change in accounting policy or change in accounting estimate and prepare the relevant note for the year ended 31 December 2024.

          Change in accounting policy disclosure


ABC Ltd bought equipment for R100,000.00 on the 1st of January 2023. On this date, the useful life of the equipment was determined to 20 years. The accounting policy stated that equipment was to be depreciated over its useful life using the straight-line method with a R0 residual value.

During the 2024 year, management decided that a more appropriate approach to would be to depreciate the equipment using the diminishing value of 10% with a residual value of R10,000.

The tax rate for both years is 30%. The SARS wear and tear rate is 5%


Required:

Discuss whether this is a change in accounting policy or change in accounting estimate and prepare the relevant note for the year ended 31 December 2024.

Added by Babalwa L.

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