Why change fixed assets’ useful lives?

Useful Life The very first and obvious answer is „because it’s required to review the useful lives at least once a year“. Should they in reality differ from what has been set for the assets in accounting, they need to be changed in a way they would reflect the real usage once again. This is the “must do” part though. There may also be a need for this change arising from the wish to manage expenses better.

Where it may seem like the actual usage is longer, even just by a year, you don’t feel the need to go through all this fuss with the changes, however in a situation where expenses are under tight pressure by either owners or investors every little helps.

The grounds for changes always need to be confirmed by real life though – changing useful lives shouldn’t result in assets being written off well before their carrying value is zero just because they are not useful anymore.

Mind you also that although changing useful lives is never done retrospective; you can always do it for the current period starting from the beginning of the period. Why? Because you’re presenting the annual report for the year as a whole after the financial year has ended. Whilst you haven’t reported any of these figures to outside you can change things for the whole year still even at the very end.

So, do think about it and should it help you with keeping expenses low, it may be the way to go.