Review of useful lives and residual values Useful life and residual value should be reviewed at the end of each reporting period and revised if expectations are significantly different from previous estimates. The carrying amount of the asset at the date of revision less any residual value should be depreciated over the revised remaining useful life. Illustration 4 - Revision of useful life An entity purchased an asset for $20,000 on 1 January 20X3. Straight- line depreciation of $5,000 per annum has been charged, assuming a four-year useful life with no residual value. On 1 January 20x5 the annual review of asset lives was undertaken and the remaining useful life for this asset was estimated at four years. The financial statements for the year ended 31 December 20X5 are being prepared. What is the depreciation charge for the year ended 31 December 20X5? Focus