Accounting Estimate
Accounting estimate is an approximation of the amount to be debited or
credited on items for which no precise means of measurement are available. They
are based on specialized knowledge and judgment derived from experience and
training. They are used in the financial statements to determine the carrying
amounts of assets and liabilities and the associated income or expense for the
period where such amounts cannot be measured with precision and certainty.
Examples of accounting estimates
include:
01. Useful life of non-current assets
02. Impairment of non-current assets
03. Bad debts
04. Provision for obsolete and slow-moving
stock
05. Revalued amounts of non-current assets
06. Provision for pension benefits
07. Useful life for depreciation of non-current
assets
08. Allowances for Receivable
09. Allowances to reduce inventories to net
realizable value
10. Warranty provisions