When to Take Software Off the Books

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Once Software is fully depreciated, should it be disposed? We are still using the software but it has no value and can't be re-sold so I'm thinking why continue to carry it on the books.
 

Fidget

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Something to remember is that the useful life of an asset and its associated depreciation is an estimate. So, if you're still using the software but have fully depreciated it, then it has a longer useful life than was estimated.

The useful life of assets should be reviewed every year and adjusted accordingly. Sounds like that hasn't been happening in this case, and you're left with a fully depreciated asset that is still being used.

If that's the case, a way (and probably the most straightforward) to deal with it is to revise the useful life of the software and continue to depreciate. In practice that means treating the current zero book value as an accounting error and:

a) deciding upon at which point in time it could've/should've been known that the software would continue to be used beyond its original estimated shelf-life.
b) deciding upon what the new estimate of its useful life should've been from that point
c) adjusting associated depreciation - this will mean restating prior period accounts from the point decided upon in a) & b), above; since it's being treated as an accounting error rather than a change in estimate from the present day.

That's based on how to deal with it under IFRS. Whether other accounting standards are the same, I don't know.
 
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Thanks for taking the time to answer my question!! I appreciate your help. You are correct, we need to update our useful life schedule.
 

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