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In: Accounting

When calculating deprecation for financial reporting purposes, would you expect FedEx to use the same or...

When calculating deprecation for financial reporting purposes, would you expect FedEx to use the same or different useful lives for their delivery vehicles as those used by UPS? (this is for example purposes not in direct comparison with these two companies)

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Expert Solution

An Asset useful life is the period of time the asset will be economically feasible to be used in the business of the client. Because of the Continuous Use, and advancement of technology, the assets useful life may be less than its Physical Life.

The Estimation of Useful Life Depends on the Managment assertion up to when the asset can economically benefit the entity. The assertion should also be supported by reasonable fact in order to ensure that the laws underlying the same have been complied with. So there can be the different useful life which can be used by FedEx and UPS for the same type of asset on the Basis of Their Economical Use. For Example: FedEx Purchased an Old Plan for delivery of goods, as in general, the useful life of the aircraft is 25 years but as the same was old due to rapid changes in technology FedEx assumed the useful life of the asset say 15 years, On the Other Hand, UPS Purchased a New Aircraft with the latest technology so UPS will Depreciate the same up to 25 Years. This creates different useful life despite the same type of asset

ekkarill92 answered 1 year ago
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