Useful life is an estimate, not a guess copied from a peer company’s footnote. Auditors look for evidence that management considered physical wear, technical obsolescence, and the firm’s actual replacement cycle.
For production equipment in Taiwan’s electronics and plastics sectors, maintenance logs are stronger evidence than a generic industry table. If a line runs three shifts, a ten-year life borrowed from a single-shift peer will draw questions.
Residual value deserves the same attention. Setting residuals at zero for vehicles that routinely sell after five years understates both assets and future gains on disposal.
Document the judgement in a short memo when lives change. Note the trigger—new maintenance programme, regulatory shift, or observed early failure—and who approved the change.
During a depreciation schedule review we recalculate a sample against policy ranges. Outliers often cluster in assets capitalised during rushed ERP go-lives, when clerks inherited incomplete lives from vendor invoices.
Keep tax lives and book lives in separate columns if they differ. Mixing them in one field is a common source of year-end true-up noise.