Change in depreciation rate/useful life


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My Company is changing the depreciation rate for almost all of the asset class, including machinery, equipment, renovation, tooling etc. Can we only apply this new depreciation rate to newly purchased assets from the month of change, say 01/01/2020, or should i also apply prospectively for the existing assets as well?

My thought is that we have reviewed the depreciation rate and identified a change, and it is hard to justify why the existing assets still follow the old depreciation rate, especially for tooling. Therefore, the new depreciation rate should be applied for all the existing assets, and all newly purchased assets.
 
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Werner Reisacher

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Google for IRS Form #3115 and related instructions for Application for change in Accounting Method.
 
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Fidget

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Depreciation is an estimate per asset. So you don't have to apply a standard rate to a whole class of assets. If the existing assets are still estimated to run the original useful life, then that's ok. If new assets aren't expected to have the same useful life as the original, then that's ok as well to have differing depreciation rates for them.

Changes in depreciation estimates are always done prospectively from the point that the estimate changes for whatever reason justifies the change.
 

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