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Can you explain me this substantive procedure of increase in useful life of NCA?
“Compare the actual useful life of tangible non-current assets recently disposed of to the new depreciation policy to assess whether this reflects the actual useful economic life”
I am unable to get what it means.Since you don’t cite a scenario, I have to make one up.
Suppose cars in a fleet were being depreciated over 3 years and management says useful life is 7 years, so depreciation is changed to reflect longer useful life.
If, de facto, cars recently disposed of were on average only 4 years old, 7 years would not be reasonable.
Sorry professor for not sharing the question scenario.
Sir I am confused in one thing that there are n number of reasons why we are disposing the NCA. So why it is considered thar asset is disposed because the life is ended.I suggest most reasons ultimately come down to useful life. E.g. if asset replacement policy for a class of assets is 4 years, that’s because management has calculated that that is the least cost option. The depreciation policy should then agree with replacement policy. If, on average, assets in that class are disposed of much sooner or later than 4 years, the depreciation policy will not be reflecting actual useful life to the company.
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