When estimates of useful life and residual value made for the purposes of calculating depreciation, in later years turn out to be materially incorrect and the asset has not reached the end of its useful life, the procedure to be followed is to:

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The best choice is to spread the remaining depreciable amount over the remaining useful life. This is because the estimates made for useful life and residual value are inherently uncertain and subject to revision over time. Therefore, it is permissible to revise these estimates in light of new information, but it is not necessary to issue corrected financial statements for prior years. Instead, the remaining depreciable amount should be spread over the remaining useful life of the asset to reflect its updated value and use.

When Estimates of Useful Life and Residual Value Made for the Purposes