My company's equipment has been fully depreciated. But they can still function. What should we do? A
Question:
"My company's equipment has been fully depreciated. But they can still function. What should we do?"
A fully depreciated equipment means that the accumulated depreciation has reached the full depreciable basis (acquisition cost-salvage value). If this occurs, before the firm disposes the fully depreciated equipment, it will remain on the balance sheet, with the cost and accumulated depreciation. But the firm can't recognize any depreciation expense on the income statement anymore related to this equipment.
The reason it happened was because the firm made a mistake in estimating the useful life of the equipment and didn't reevaluate this assumption annually as suggested by FASB. How does this affect the relevance of the information provided to the investors? To discuss this, you may talk about it from the following perspectives:
- Past performance: how did this affect your assessment of the firm's past financial performance? (for example, from a "matching" perspective: did the expenses incurred in the past match with the revenue recognized well?);
- Future forecast: what additional information you would like the firm to provide in this case to assist your forecasting better?
Expert Answer:
Assets are items of value and that value is displayed on a companys balance sheet When an asset is r... View the full answer
