Professor Adams' Lecture Materials - ACC202-M01-LO5

Professor Adams' Lecture Materials

LO1-05: Explain the appropriate accounting treatment required when a change is made in the service life or residual value of property, plant, and equipment and intangible assets.

Changes in estimates

The calculation of both depreciation and amortization depends on estimates of:

1. Useful life and
2. residual value.

It's inevitable that some estimates will turn out to be incorrect. What do we do if estimates of useful life and/or residual value change during the life of a PP&E or finite life intangible asset?

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