[Anonymous]

This is actually for work, not for an exam.–Does anyone know if you can add a lease renewal term to your existing term to calculate the useful life for depreciation? We have an automatic renewal built into our lease, which expires in 3 years. We would like to depreciate the building improvements over the 13 year period (3 years on the existing lease and 10 years on the renewal), instead of the 3 year period. Is that acceptable?

Also, what useful life do you use when you make major improvements on a building that you own?

I have googled everything I can think of to determine the appropriate useful life to use for these improvements and I haven’t found it yet.

[Anonymous]

should be the lesser of the length of the lease or the allowable depreciable period. and yes, you can depreciate the new improvements over the 13 years remaining on the lease.

i think improvements to your own building can vary, depending on the improvement, from 25-40 years.

[Anonymous]

should be the lesser of the length of the lease or the allowable depreciable period. and yes, you can depreciate the new improvements over the 13 years remaining on the lease.

i think improvements to your own building can vary, depending on the improvement, from 25-40 years.

[mena je twa]

Yes , you can tack on another 10 yrs to your existing life and calculate depreciation.

Just make sure you have good documentation for it, as to what exactly was the NBV on that date, before you decided to tack on more years. Cause when auditors will do a flux analysis and see this variance in depreciation expense or life of the years, they will for sure question it.

Licensed CPA, Texas - 2012

[mena je twa]

Yes , you can tack on another 10 yrs to your existing life and calculate depreciation.

Just make sure you have good documentation for it, as to what exactly was the NBV on that date, before you decided to tack on more years. Cause when auditors will do a flux analysis and see this variance in depreciation expense or life of the years, they will for sure question it.

Licensed CPA, Texas - 2012

[Author]

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