Depreciation & Useful Life

[shunmas]

Hi !

If we have to depreciate BILLIARD and SNOOKER TABLES, how the rate should be determined. If its useful life is 3 years, what does this mean that we will sell them after 3 years or will have to sell them and buy new ones?


Thanks

[hariharm]

Hi,

As in any asset, the depreciation should be over the ecomic useful life of the asset. So for snooker and billiards tables, if the entity has determined that the useful life is 3 years, this must have been based on experience or practice in the industry. Having said that, the accounting decision does not dictate how the business will use and operate its assets. If this is a club that charges for people to come and play, the clients will expect the tables to maintained at a certain quality. By keep them well-maintained the club may be able to operate the tables for more than 3 years without the players complaining. At some point it may be cheaper to just sell the tables and buy new ones.... but it doesn't have to be exactly at 3 years. And this expereience may prompt them to consider if the depreciable life should be 3 years or something else.