A change in the measurement basis applied is a change in an accounting policy, and is not a change in an accounting estimate. When it is difficult to distinguish a change in an accounting policy from a change in an accounting estimate, the change is treated as a change in an accounting estimate. (IAS 8, p35).

Required

a) Explain the accounting treatment for a change from the residual balance method of depreciation to the straight line method of depreciation.

b) Explain the accounting treatment for a change from the weighted average method to a FIFO (first-in first-out) method for valuing the cost of inventory.