Next, the fixed asset register should be sorted by asset class or asset type, such as machine tools and IT equipment. The final stage of the analysis is to determine the age of the fully depreciated assets in each category. Should the average life be beyond the original fully depreciated date, it can then be applied to the active file. So, if on balance existing fully depreciated assets were written down to zero five years ago, it is obvious that existing asset lives can be extended by a minimum of five years, and probably more.
The ‘what if’ capabilities of fixed asset accounting software can then be utilized to see the impact on annual depreciation expense of extending the remaining lives by five years, eight years and 10 years.