You have to make a judgement as to whether the company's policy is appropriate. What evidence would you seek

Question

Assume that a company in the engineering industry is replacing a lathe. The previous lathe had a useful economic life of ten years and the company wrote it oft in ten equal instalments. The new lathe has a number or new features, including electronic guidance, and operates much more efficiently and quickly than the previous lathe. The company wishes to write it off over ten years as was the case for the previous lathe. You have to make a judgement as to whether the company's policy is appropriate. What evidence would you seek? Do you think you would be able to conclude that the assertion of a ten-year life is valid on the basis of available evidence? What do you think would be the critical factor in making a judgement about this matter?

Answer 1

The historic data of similar companies can be referred to for the judgment. However it sounds that the company is  adopting the depreciation method rightly. Moreover attachment of electronic segment or component though do help increasing efficiency, but electronic components usually are short life spanned machinery, which damages very often or goes out of date over a very short span of time.

I find no fault in the policy of the company.