On January 2, 1993, Quo, Inc. hired Reed to be its controller. During the year, Reed, working closely with Quo's president and outside accountants…

A change in the estimated useful life of a depreciable asset is a classic example of a change in accounting estimate. Such changes arise from new information or developments—in this case, a "production breakthrough"—that alter previous judgments. According to U.S. GAAP, changes in estimates are accounted for prospectively. This means the change affects the financial statements of the current and future periods by altering the depreciation expense from the date of the change forward. It does not require the restatement of previously issued financial statements.

A. A change in accounting principle is a switch from one accepted accounting method to another (e.g., changing from LIFO to FIFO). This scenario involves revising an input, not the method itself.
C. This is not a correction of an error. An error results from a mathematical mistake or a misuse of facts that existed when the original estimate was made. The change here is due to new information.
D. The event clearly fits the definition of a change in accounting estimate as specified by authoritative accounting literature and is therefore a recognized type of accounting change.

1. FASB Accounting Standards Codification (ASC) 250-10-20, Glossary: Defines a change in accounting estimate as "A change that has the effect of adjusting the carrying amount of an existing asset...Changes in accounting estimates result from new information."

2. FASB Accounting Standards Codification (ASC) 250-10-55-8: Provides examples of items requiring estimates, explicitly including "service lives and salvage values of depreciable assets." This directly classifies the scenario as a change in estimate.

3. Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2019). Intermediate Accounting (17th ed.). Wiley. In Chapter 22, "Accounting Changes and Error Analysis," the text states, "Examples of changes in estimates are: 1. Changes in the estimated useful lives and salvage values of depreciable assets." This is a standard textbook used in accredited university accounting programs.

4. Spiceland, J. D., Nelson, M. W., & Thomas, W. B. (2021). Intermediate Accounting (11th ed.). McGraw-Hill Education. Chapter 4, "The Balance Sheet and Financial Disclosures," discusses accounting changes and explicitly categorizes a change in the useful life of equipment as a change in estimate accounted for prospectively.