Final answer:
Companies use the composite approach mainly to simplify the accounting process and reduce the risk of errors by grouping similar assets with approximately the same useful lives for depreciation purposes. This method is convenient, may not enhance the exact accuracy of financial statements, but needs to align with accounting standards.
Step-by-step explanation:
Companies frequently use the composite approach when the assets are similar in nature and have approximately the same useful lives, primarily to simplify the accounting process. This approach allows a company to group such assets together and depreciate them as a single asset, which leads to less complexity in tracking individual asset lives and associated depreciation schedules. It is favored for its convenience in situations where the assets collectively contribute to the company's revenue generation and do not need to be individually managed for accuracy in financial statements. The composite approach also helps in reducing the risk of errors that may arise when managing and calculating depreciation for numerous individual assets. It does not necessarily aim to improve the accuracy of financial statements or to comply with accounting standards, although it must be applied in a manner consistent with relevant accounting principles. The use of this approach should be balanced against the need for precise information that accurately reflects the company's financial position.