Account for Changing Depreciation Estimates - Explained
How to Account for Changes in Depreciation Estimates?
Written by J. Mance Gordon
Updated at April 18th, 2024
- Marketing, Advertising, Sales & PR
- Accounting, Taxation, and Reporting
- Professionalism & Career Development
-
Law, Transactions, & Risk Management
Government, Legal System, Administrative Law, & Constitutional Law Legal Disputes - Civil & Criminal Law Agency Law HR, Employment, Labor, & Discrimination Business Entities, Corporate Governance & Ownership Business Transactions, Antitrust, & Securities Law Real Estate, Personal, & Intellectual Property Commercial Law: Contract, Payments, Security Interests, & Bankruptcy Consumer Protection Insurance & Risk Management Immigration Law Environmental Protection Law Inheritance, Estates, and Trusts
- Business Management & Operations
- Economics, Finance, & Analytics
- Courses
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.
Related Topics
-
What are Plant Assets? – Financial Accounting
- Depreciation, Depletion, and Amortization
- How Reporting Depreciation for Tax is Unique? – Financial Accounting
- What happens when Depreciation Estimates Change? – Financial Accounting
- What are Capital Expenditures? – Financial Accounting
- How to Dispose of Plant Assets? – Financial Accounting