Diminishing value method where you depreciate the asset by a percentage rather than the straight line method where the same amount gets depreciated each year.
Straight line
Straight line
This is an accelerated method of depreciation in which the depreciation is computed by applying a fixed rate to the book value of the fixed asset. This method results in a higher depreciation charge in the early life of the asset compared to later years. The rationale for using this method is that many kinds of plant assets are most efficient when new, so they provide better service in the early years of its useful life. It is therefore consistent with the matching rule to allocate more depreciation to the early years compared to later years if the benefits to be received in the early years are higher. E.g. Computers are more useful in the early years compared to later years, since they are easily obsolete by technological advances. Hence, it has diminishing value as the years goes by.
Depreciation is the process of reducing the historical cost of an asset by an annual amount relating to the amount of asset usage. [ Most assets are recorded at historical costs by accounting departments; based on the type of asset, certain methods must be used to reduce the value of the asset each year. Depreciation affects the company financial statements, moving the depreciation amount from the asset value on the balance sheet to the depreciation expense on the income statement. GAAP Methods Several methods of depreciation are used to record the depreciation expense on the accounting books. The most popular methods include: Straight-Line: This is the simplest depreciation method; it is calculated by subtracting the asset salvage value from the asset's historical cost, then dividing the remaining amount by the useful years of the asset. This creates a constant amount for companies to depreciate each year. Declining Balance: The declining balance method is used for assets with shorter life spans for a company. This allows companies to deduct higher depreciation amounts early in the asset life and lower amounts as the asset is phased out of the company. Companies will usually determine what percentage of the asset will be used each year and multiply it by the asset value to determine annual depreciation. Units of Production: Manufacturing companies may use this method for assets used for production purposes only. It is calculated by subtracting the salvage value from the historical asset cost; this amount is then divided by the total unit production of the machine to get a per-unit depreciation amount. Each month, the units produced are multiplied by the per-unit depreciation amount to calculate the expense. Tax Method When calculating depreciation for U.S. tax purposes, all assets entered into service by a company after 1986 must use the Modified Accelerated Cost Recovery System (MACRS). The Internal Revenue Service (IRS) provides asset classes for companies to determine the useful life and asset salvage value for tax purposes.
The straight line method assumes that the useful life of an asset is evenly distributed to its life, so results in a constant depreciation charge per year provided the estimated residual value remains constant over the life of the asset. for example, Asset's value = $100,000 useful life = 10 years residual value = $20,000 depreciation per year = (100,000 - 20,000)/10 = $8000 per year The diminishing balance method assumes that the asset is more useful on the early days and less useful in the later days, so it results in more depreciation charge in the early years and the charge decreases as the asset becomes old. for example, Asset's value = $100,000 residual value = $20,500 depreciation rate = 10% useful life = 15 years depreciation year 1. (100,000 * 10%) = 10,000 depreciation year 2. (100,000 - 10,000 W1) * 10% = 9000 depreciation year 3. (100,000 - 19,000 W2)* 10% = 8100 depreciation year 4. (100,000 - 27,100 W3)* 10% = 7290 W1 = depreciation of year 1 W2 = depreciation of year 1 and year 2 combined W3 = depreciation of year 1, year 2 and year 3 combined
The mutual fund industry controlled about $300 billion in assets by the early 1980s
The early school of psychology that employed the method of introspection was known as structuralism, pioneered by Wilhelm Wundt. Structuralism focused on breaking down mental processes into their basic components to understand the structure of consciousness.
hard assets (plant and inventory)
probably not
MACRS is better because it allows you to take bigger deductions in the early years of the project which is a time value benefit.
Typesetting.
carbon dating
The Tigris and Euphrates rivers were assets to the early peoples of Sumer. They remain important rivers to this day.