Correction
A pooled rate summarizes member-level estimates. It does not replace the register that supports those estimates.
For each member, retain identity, cost, residual value, useful life, in-service date, pool assignment, additions, and retirement evidence. Compute each member's annual depreciation first. The pool rate is total annual depreciation divided by total pool cost. Composite life is total depreciable amount divided by total annual depreciation.
ASC 360-10-35-4 permits a group of assets to serve as the depreciation unit. Its cost allocation still must be systematic and rational. Paragraph 35-8 explains that group-life estimates can reflect loss, damage, wear, obsolescence, maintenance, and replacement experience. Neither paragraph permits an unsupported pool or the loss of member records.
How to avoid the mistake
Recompute the pooled rate whenever supported member estimates or the population change. Reconcile member costs to the pool cost and member annual amounts to pool depreciation. Keep ordinary pool-retirement policy separate from the sale or disposal of an individually accounted asset. Escalate an unusual or material retirement instead of forcing it through routine pool mechanics.
When this mistake may appear
- A group or composite depreciation rate is applied to several assets.
- A pooled asset is added, retired, sold, impaired, or moved to another pool.
Your work may contain this mistake if:
- Assigns one life to every member before deriving the pooled rate.
- Cannot reproduce pool depreciation from member-level inputs.
- Removes the whole pool when one member retires.