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What is the effect of an increase in the useful life of an asset in a company's finan
An item bought on 1st October 2007 cost 20 million to purchase and install. It is being depreciated using the straight line basis over a 5 year period. On 1st October 2009 the production manager realised that the item was likely to last 8 years in total from the date of purchase. The assistant accountant suggested that they should avoid the depreciation charge in that period ending 30th September 2010 and instead credit 0.5million to the income statement. Under IAS 8 discuss the acceptability of the suggestion and quantify its effect on the financial statements of the company.
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