## Changes in Estimates — Depreciation Method, Useful Life, Residual Value
### Nature of Change
Changes in depreciation method, useful life, or residual value are classified as changes in accounting estimates — not errors, not policy changes.
Governed by: AS 5 — Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies
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### Accounting Treatment: Prospective
Apply the change going forward only — do not restate prior period figures.
Formula for Revised Depreciation:
```
Revised Depreciation = (Current Carrying Amount − Revised Residual Value)
÷ Revised Remaining Useful Life
```
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### Summary Table
| Change | Treatment |
|---|---|
| Change in useful life | Recompute from current CA over revised remaining life |
| Change in residual value | Recompute from current CA using revised residual value |
| Change in method (e.g., SLM → WDV) | Apply new method to current CA going forward |
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### Impact of Residual Value on Depreciable Amount
Depreciable Amount = Cost − Residual Value
If Residual Value equals the Cost → Zero depreciation (depreciable amount is nil).
| Scenario | Cost | Residual Value | Depreciable Amount | Annual Dep. (20 yrs) |
|---|---|---|---|---|
| Case 1 | ₹10,00,000 | ₹10,00,000 | ₹0 | NIL |
| Case 2 | ₹10,00,000 | ₹9,00,000 | ₹1,00,000 | ₹5,000/yr |