Determining Depreciation

**jeff9756** · 02-07-2009 10:05 AM

I would like to find out how an individual can estimate an average life of an asset (lets say a computer). Does this imformation come from a reference guide. How exactally does a company estimate the life so they are able to calculate and expense depreciation on the asset. Thanks so much.

**ZahiD** · 02-07-2009 09:53 PM

If you are talking about an asset such as a computer, it is better to expense it instead of depreciating it. Computers used to by expensive back in the days but not any more. Machinary usually involves depreciation which can be determined based on prior machinary in use or with comparing it to similar assets.

Every company has its own set of records that helps them justify the useful life of an asset. I hope that helped...

**accountingjobs** · 03-09-2009 09:18 PM

Usually computers (and similar equipment) are depreciated over 3 years (36 months).. It really depends what line of business you're in - for example a software company might depreciate their computer equipment while a construction business with 2 or 3 computers might just expense it...

**ajetrumpet** · 03-15-2009 06:38 PM

Originally Posted by ZahiD

If you are talking about an asset such as a computer, it is better to expense it instead of depreciating it.

not necessarily. =) Depends on the client really, and the policies and decisions of the company. You can find this information in the tax book, or any other reference guide. It lists the MACRS shedules and the appropriate life for those assets.

**ZahiD** · 03-15-2009 11:57 PM

Originally Posted by ajetrumpet

not necessarily. =) Depends on the client really, and the policies and decisions of the company. You can find this information in the tax book, or any other reference guide. It lists the MACRS shedules and the appropriate life for those assets.

I agree with what you said... sometimes a company policy may state depreciating but if you talk about accounting, it is better to expense computers that costs mere $300-$500 these days. I believe it is the materiality principle that dictates that.

**Chris2289** · 04-16-2009 07:58 AM

I think it depends on the size of the companies and the number of computers they own. If it is a big company they will be less likely to use the materiality principle as the value of computers are lower and are less likely to affect the overall financial position. Although if it is a whole system they are looking at replacing then it would be more likely to use the expense method

**wrei@comcast.net** · 07-01-2009 06:50 AM

Originally Posted by jeff9756

I would like to find out how an individual can estimate an average life of an asset (lets say a computer). Does this imformation come from a reference guide. How exactally does a company estimate the life so they are able to calculate and expense depreciation on the asset. Thanks so much.

Companies are dealing with 2 types of Fixed Assets. One category are assets that are subject to wear and tear. (Trucks milages, machines - operating hours, etc.) The other category are assets that are replaced because of more superficial reasons such a executive or sales men cars that are replaced after a short period of time due to PR reasons. (curb appeal).

In addition to these criterias, you can look up the depreciation chart published by the IRS which must be used for tax reporting purposes. (MACRS)
Werner Reisacher

**Mike@boiron** · 07-01-2009 07:08 AM

Originally Posted by wrei@comcast.net

Companies are dealing with 2 types of Fixed Assets. One category are assets that are subject to wear and tear. (Trucks milages, machines - operating hours, etc.) The other category are assets that are replaced because of more superficial reasons such a executive or sales men cars that are replaced after a short period of time due to PR reasons. (curb appeal).

In addition to these criterias, you can look up the depreciation chart published by the IRS which must be used for tax reporting purposes. (MACRS)
Werner Reisacher

And how exactly are these superficial fixed assets treated any differently??? Are you suggesting you would assign a shorter life to these assets because they might get replaced sooner? Not too sure the IRS is going to go along with that.

**wrei@comcast.net** · 07-03-2009 11:29 AM

Originally Posted by Mike@boiron

And how exactly are these superficial fixed assets treated any differently??? Are you suggesting you would assign a shorter life to these assets because they might get replaced sooner? Not too sure the IRS is going to go along with that.

Let's assume you are running a Limo company. Your success will be limited if you do not replace your limos long time before the possible useful economic life of the cars. This is the reality, accepted by the IRS and has little to do with superficial transactions

**Pat** · 07-04-2009 12:01 AM

Use your best estimate for book. Though you replace a capital asset in fewer years than the standard estimated life as a normal practice, that doesn't allow you to fully depreciate it for tax without taking into consideration its estimated salvage value at that point in time. MACRS keeps life simple. But why even discuss tax life if you're going to expense it anyway under 179.

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