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Useful Life

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mavislossie
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26 views2 pages

Useful Life

Uploaded by

mavislossie
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

Useful Life

When determining the useful life of PPE,


consider:
Expected usage (e.g. production hours,
shifts).
Physical wear and tear, depending on
use and maintenance.
Technical/commercial obsolescence
(new technology, reduced demand).
Idle time can still reduce benefits
(wear/aging).

Carrying Amount
Definition: Cost of asset accumulated
depreciation.
Example (Smart Concepts photocopy
machine):
Cost: C120 000.
Depreciable amount: C105 000.
Depreciation for 2025 (8 months) = C17
500.
Carrying amount at 31 Dec 20X5 = 120
000 17 500 = C102 500.

Key Point
Depreciation = cost allocation, not
valuation.
Depreciation expense portion of cost
already consumed (charged to P&L).
Carrying amount portion of cost not yet
consumed (future benefits still available).

Exam tip: Always link carrying amount


back to future benefits it shows the
unconsumed service potential of the asset.

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