When an asset's estimated useful life and residual value turn out to be materially incorrect and the asset has not reached the end of its useful life, the correct procedure to follow is:

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When an asset's estimated useful life and residual value turn out to be materially incorrect and the asset has not reached the end of its useful life, the correct procedure is to allocate the remaining depreciable amount over the remaining useful life. This will ensure that the depreciation expense going forward is based on the corrected estimates, which will accurately reflect the asset's consumption of economic benefits over its remaining useful life. Re-issuing financial statements for all prior years or for only the most recent three years may not be necessary if the impact of the correction is not significant. Ignoring the problem is not a valid option as it would result in misstated financial statements.

When an Asset's Estimated Useful Life and Residual Value Turn