Account for Changing Depreciation Estimates - Explained
How to Account for Changes in Depreciation Estimates?
Written by J. Mance Gordon
Updated at April 18th, 2024
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Changes in Depreciation Estimates
Depreciation is dependent on three things:
- tax,
- salvage value, and
- useful life.
If we have a change in salvage value or useful life, we use the new estimates to compute the new depreciation.
We have to do a recalculation or a new calculation for the current and the future periods by revising the depreciation expense computations.
The objectives is to spread the cost yet to be depreciated over the remaining useful life. When we're doing the computation, we're only affecting this year and forward.
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