Property, plant, and equipment represent some of the largest assets on a company's balance sheet. They also represent large expense deductions in the form of depreciation. Depreciation, however, is mostly estimates like the useful life and salvage value. Management even gets to choose which method they use. Discuss the implications of the different assumption used in calculating depreciation. What effect does changing these assumptions have on the balance sheet and income statement?
Background: Property, plant, and equipment represent some of the largest assets on a company's balance sheet. They also represent large expense deductions in the form of depreciation. Depreciation, however, is mostly estimates like the useful life and salvage value. Management even gets to choose which method they use. Discuss the implications of the different assumption used in calculating depreciation. What effect does changing these assumptions have on the balance sheet and income statement? Please note the discussion question is NOT just to discuss the computation of the methods of depreciation.