 Hello, in this lecture, we will define change in accounting estimate. According to fundamental accounting principles, while the 22nd edition, the definition of change in accounting estimate is change in an accounting estimate that results from new information, subsequent development, or improved judgment that impacts current and future periods. When we're thinking about a change in an accounting estimate, we are of course thinking about an accounting estimate that has been made in the past. The fact that it is an estimate is an indication that we don't really know exactly what will happen in the future at the point of that estimate. In the future, things could change if they change significantly, then we'd want to revisit that estimate. And the question then would be, what do we do about this estimate? How can we account for this estimate now that we have new information? It's often having to do with timing differences, having to do with the matching accrual principle, an idea of matching up the expenses to the related income in the same period. That's what often drives the need for certain estimates, such as estimates related to bad debt expense and the allowance for doubtful accounts, estimates such as depreciation, putting the asset on as an asset, the fixed asset on as an asset, and then depreciating that fixed asset. Things like warranties wanting to write off the expense related to the warranties at the same time that the defaulted merchandise was sold rather than a future time period. If we have an example of depreciating our equipment here being a tank, we have the cost and we have the less the salvage value. This is the calculation of the straight line depreciation and estimate that would give this the amounts to be depreciated. We would then divide that by the four years to give us a yearly depreciation of the 59-375 that we would then depreciate. At some point after the first year, it could be that we have new information and we believe that these estimates are not accurate anymore. For example, we might say, hey, that four years, that's not applicable. It might be less or more based on information that has happened in the future. Our question then is, well, if we think we're going to have this for a significantly longer or shorter period of time, what do we do at this point in time? Oftentimes it's going to be that we were going to fix the estimate as of this point forward, meaning take the depreciation oftentimes, the book value as it is now, and then adjust it for the useful life that we think is relevant as this point in time. The other thing that could change in this particular estimate is the salvage value. The salvage value could change. That's going to be the amount that we believe that we could sell the equipment for at the end of the useful life. Maybe we think that's going to be more or less. That too could change our estimate. Obviously, the cost will not change, and that's something that's not an estimate. That's concrete. The salvage value is an estimate, and the useful life in this case are estimates that could change at a future point in time. We're going to make our best guess at the point in time that we purchase the equipment.