Sometimes there are revisions of salvage value, useful life, or asset total projected output. In such situations nothing should be done to correct the previously reported financial statements. However, the new information is taken into calculations of the present and future depreciation expenses.

Let us look at an example. A company bought a tool that cost $12,000 and has a salvage value of $3,000. The useful life is expected to be 3 years. Therefore, depreciation expense for the first year under straight-line method is $3,000 ([$12,000 - $3,000] / 3 years).

Assume that the company obtained new information about the asset useful life after the asset first year of operation. It was determined that the useful life will be 6 years. So, as the tool has already been in use for one year, there is 5 more years during which depreciation will be charged. The salvage value remains the same, and the new depreciation expense is computed as follows:

Illustration 15: Change in depreciation from revision of useful life

Now assume that the company got new information about the salvage value (the estimated useful life is not changed and remains 3 years). The new salvage value is considered to be $4,000 instead of $3,000. The useful life is the same:

Illustration 16: Change in depreciation from revision of salvage value