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Life of an asset

sravani (CA final student) (78 Points)

22 June 2011

hello friends

i have a doubt

how can we calculate no. of useful life of an asset when the depreciation calculated in WDV method

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Raghav Toshniwal (student) (450 Points)
Replied 23 June 2011

hello Sravani,

u asked very nice ques......In order to determine the useful life of an Fixed asset, you need to refer to the Recovery Periods of each fixed asset given by the IRS (i.e. Internal Revenue Service), Department of Treasury in its publication. These Recovery Periods listed by IRS are standard anticipated useful lifespan of an fixed asset, though such assets may probably run longer than that period, but IRS anticipates that you are not likely to use that asset for business purpose after the said anticipated useful life. You then are more likely to trade it in and get a new fixed asset. Most of the accountants use these IRS estimates unless there's unique about the way business uses its fixed asset, for example a Trucking Company whose trucks get used up more quickly than those used by a business for occassional deliveries.

In short if the management of the enterprise is of view that such asset will depreciate more faster due to some unique business nature & use then it may opt such useful life, but for this the management have to consult the expert professional for such estimation..

Below here i m mentioning the Estimated useful life of some business assets---

1. For Cars, Trucks, Taxies, Buses, Trucks, Computers, Office machines (faxes, calculators, copiers etc.), Research equipments -------- 5 years

2. Office furniture & fixtures ----- 7 years.

Hope now ur query remains solved....

REGARDS

RAGHAV