Selecting a Depreciation Method
Lesson:
Depreciation methods vary in terms of how quickly they start estimating the decrease in an asset's worth.
- Straight-line depreciation estimates decline in value evenly across each year of ownership.
- Accelerated depreciation estimates declines as larger early on and more slowly toward the end of owernship.
You are explaining depreciation methods to a business owner who needs some help.
Here's what you know:
- A private company unconcerned with public market perceptions prioritizes tax minimization over reported earnings.
Which high-level class of depreciation methods should be used in this case?
Answer:
- Accelerated depreciation (like double declining balance or sum-of-years)
Explanation:
-
Accelerated depreciation estimates declines as larger early on and more slowly toward the end of owernship.