CSEET · Fundamentals of Accounting · Depreciation and Amortization
As per AS 10, which statement about the review of the residual value and useful life of an asset is correct?
Residual value and useful life must be reviewed at least at each financial year-end. If expectations differ from previous estimates, the change is accounted for as a change in an accounting estimate under AS 5, not as a change in accounting policy.
- AThey are reviewed only when the asset is sold
- BThey are fixed at purchase and can never be revised
- CThey are reviewed at least at each financial year-end, and any change is a change in accounting estimateCorrect
- DThey are reviewed every five years, and any change is a change in accounting policy
Explanation
AS 10 requires residual value and useful life to be reviewed at least at each financial year-end. If expectations differ from earlier estimates, the change is accounted for as a change in an accounting estimate under AS 5. The option calling it a policy change is wrong.
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