Assets

If an asset that is to be depreciated over 5 years and part way through changes to 10 years is it correct to re-calculate the depreciation charge and adjust the accumulated depreciation to reflect the new amount. This would then release the over depreciated amount back to accounts.
Or do you re-calculate the new monthly charge and leave existing depreciated value as is?
The asset is for dilapidations to the building depreciated over the original period of 5 years. The value has not changed only the lease period.
After checking for clarification I have been given two answers??
Or do you re-calculate the new monthly charge and leave existing depreciated value as is?
The asset is for dilapidations to the building depreciated over the original period of 5 years. The value has not changed only the lease period.
After checking for clarification I have been given two answers??
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Comments
Personally, I would just use the new rate rather than going back and changing things or reversing prior year depreciation charges. There shouldn't be any tax consequences, i.e. under/over-payment of tax, so in my opinion there's nothing to worry about.
If the business has its accounts audited and the mistreatment is material then the auditors may decide that a prior year adjustment is required (but I'd leave that judgement call to them).
Sorry, am I misunderstanding you here? Are you saying the 'asset' is the projected COST of dilapidations on the building you're currently leasing where the lease period (but not the dilaps cost) has extended? How are the dilaps cost an asset to be depreciated against?
I'm assuming this is related to your other thread on the same topic? If so, I don't believe you were given two different answers where the dilaps were being correctly treated as an accrued liability, not an asset. Both answers agreed to release an over-accrued cost if there was one. I expanded mine for you to revisit the dilaps cost to see if the amount already accrued was sufficient enough to carry forward over the next five years without further additions.
As an accrual we could re-value the amount accrued to date and reduce, the question was can this be done if it has to be classed as a depreciating asset?
I see where you're coming from now but the incurrment of costs at the start of a lease is arguable IMO as they're only ever realised at the end and have no definitive value at the beginning. Is this an IFRS or IAS and would anyone else reading this thread classify the dilaps as an asset? I know we certainly wouldn't here and would - and do - accrue for them the same as your predecessor did.