Fixed assets are depreciated using the straight-line method based on their costs less estimated residual values over their estimated useful lives.
(a) in the case of fixed-term contracts, where their term is 12 months or less, the total contract value for their duration, or, where their term exceeds 12 months, their total value including the estimated residual value;
The estimated useful lives, estimated residual values and depreciation method of the fixed assets are reviewed, and adjusted if appropriate, at each balance sheet date.
Notice that the estimated residual value of the delivery truck does not enter into the computation of depreciation expense until the very end.
Depreciation is provided on a straight-line basis to write off the cost less estimated residual value of each asset over its estimated useful life.
