What action should be taken with respect to the accounting

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Reference no: EM132892233

Accounting estimates and errors

Young Ltd estimates its future liability for repairs to products sold with a 12-month warranty as a percentage of its net credit sales. Warranty expense and actual repair costs for the last 2 years ending 30 June were as follows.

Warranty expenses (Accounting)		Actual warranty cost
2019-20	$40000	$64000
2020-21	$44000	$73000

Required

Comment on Young Ltd's accounting method for warranty liabilities. What action should be taken with respect to the accounting estimates? If an investigation during 2021-22 finds that the figure for warranty expense was incorrectly calculated for 2020-21 and should have been $70 000, what action is required under AASB 108/IAS 8?

Reference no: EM132892233

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