0:00:00.399,0:00:04.160

All right. So now we've done the premise

0:00:02.639,0:00:05.839

of depreciation we've done the basics of

0:00:04.160,0:00:08.000

depreciation and we said that

0:00:05.839,0:00:09.599

depreciation is dependent on three

0:00:08.000,0:00:12.000

things you have your tax,

0:00:09.599,0:00:14.080

your salvage value, and your useful life,

0:00:12.000,0:00:15.120

and we said savage values fly for both

0:00:14.080,0:00:17.359

essence

0:00:15.120,0:00:18.400

those things can change so what happens

0:00:17.359,0:00:20.320

when they actually do

0:00:18.400,0:00:22.960

change what do we need to do that's

0:00:20.320,0:00:24.640

where this video comes into play.

0:00:22.960,0:00:26.000

So what happens when we have a change in

0:00:24.640,0:00:26.880

the essence whether they be salvage

0:00:26.000,0:00:29.199

value or useful

0:00:26.880,0:00:30.000

life? What we do is we use the new

0:00:29.199,0:00:31.679

estimates to compute

0:00:30.000,0:00:34.000

the new depreciation so we have to do a

0:00:31.679,0:00:35.520

recalculation or a new calculation

0:00:34.000,0:00:37.200

for the current and the future periods

0:00:35.520,0:00:38.160

by revising the depreciation expense

0:00:37.200,0:00:39.840

computations

0:00:38.160,0:00:41.600

by spreading the cost yet to be

0:00:39.840,0:00:42.160

depreciated over the remaining use of

0:00:41.600,0:00:44.160

life,

0:00:42.160,0:00:45.440

now that's a big paragraph right there

0:00:44.160,0:00:47.039

and I want to kind of break this down

0:00:45.440,0:00:48.719

there's two things really specifically

0:00:47.039,0:00:50.559

that I want you to pay attention to.

0:00:48.719,0:00:52.239

When we're doing the compute computation

0:00:50.559,0:00:54.000

what we're doing is we're affecting

0:00:52.239,0:00:55.680

this year and forward that's why it says

0:00:54.000,0:00:57.280

current and future is we do this

0:00:55.680,0:00:58.480

prospectively we don't have to go back

0:00:57.280,0:01:00.079

to the very beginning

0:00:58.480,0:01:01.760

and restate and recalculate all this

0:01:00.079,0:01:02.879

stuff we're gonna if it's just a simple

0:01:01.760,0:01:04.320

change in estimates

0:01:02.879,0:01:06.080

we're gonna start it from this year and

0:01:04.320,0:01:07.040

move forward with it, so that's step

0:01:06.080,0:01:07.920

that's part one.

0:01:07.040,0:01:09.280

The other thing I want you to pay

0:01:07.920,0:01:11.439

attention to is where it says by

0:01:09.280,0:01:13.760

spreading the cost yet to be depreciated

0:01:11.439,0:01:15.040

i'm only going to affect what I have not

0:01:13.760,0:01:16.720

depreciated yet

0:01:15.040,0:01:19.520

everything that i've already depreciated

0:01:16.720,0:01:22.400

i'm not going to touch that's already in

0:01:19.520,0:01:23.840

my depreciation accumulated depreciation,

0:01:22.400,0:01:26.000

i'm only going to affect what has not

0:01:23.840,0:01:28.000

been depreciated yet.

0:01:26.000,0:01:29.680

So the revision is referred to as a

0:01:28.000,0:01:30.400

change in the accounting estimates and

0:01:29.680,0:01:32.240

it reflects

0:01:30.400,0:01:33.600

only in the future financial statements

0:01:32.240,0:01:35.119

again I do not have to go back and do

0:01:33.600,0:01:36.799

this retrospectively.

0:01:35.119,0:01:38.799

In the next video i'm going to show you

0:01:36.799,0:01:40.320

how to do a change in estimate

0:01:38.799,0:01:43.840

example so you can kind of get a better

0:01:40.320,0:01:43.840

idea of that.