Explain the effect of the changes made by management

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Majestic Enterprise Limited currently depreciates all its non-current assets using a straight line basis over a period of ten years. However, management decided on January 1, 2019 that even though its non-current assets have a remaining useful life of two years, a revision will be made to increase the remaining useful life to five years instead.

On the matter of its inventories, which are all currently carried at average cost method, a change will be made as of January 1, 2019 to first in first out method. If the first in first out method was used initially, then the entity's cost of sales would have experienced an accumulated decrease of $400 million.

Required:

Problem 1: Briefly explain the effect of the changes made by management in accordance with IFRS.

Reference no: EM132933725

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