Problem:
Adjusting entries made by companies each period often involves the use of estimates. Examples would include calculating depreciation of long-lived assets, determining the amount of accounts receivable that are uncollectible, or estimating the impairment of assets that are no longer worth the amount paid for them.
How does the use of estimates affect the financial statements of a company?
In your opinion, does the use of estimates create opportunities for companies to manipulate financial reporting?