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    What Is Accelerated Depreciation

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    Justine Airra Ondoy
    Accelerated depreciation allows greater depreciation expenses in the early years of an asset's life compared to straight-line depreciation, which spreads expenses evenly. Methods like double-declining balance result in higher expenses initially that decrease over time. This aligns depreciation with an asset's actual heavier use when new. Companies may use accelerated depreciation to defer taxes by reporting lower income in early periods.

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    What Is Accelerated Depreciation

    Uploaded by

    Justine Airra Ondoy
    25 views1 page
    Accelerated depreciation allows greater depreciation expenses in the early years of an asset's life compared to straight-line depreciation, which spreads expenses evenly. Methods like double-declining balance result in higher expenses initially that decrease over time. This aligns depreciation with an asset's actual heavier use when new. Companies may use accelerated depreciation to defer taxes by reporting lower income in early periods.

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    What is Accelerated Depreciation

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    Accelerated depreciation allows greater depreciation expenses in the early years of an asset's life compared to straight-line depreciation, which spreads expenses evenly. Methods like double-declining balance result in higher expenses initially that decrease over time. This aligns depreciation with an asset's actual heavier use when new. Companies may use accelerated depreciation to defer taxes by reporting lower income in early periods.

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    © All Rights Reserved
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    25 views1 page

    What Is Accelerated Depreciation

    Uploaded by

    Justine Airra Ondoy
    Accelerated depreciation allows greater depreciation expenses in the early years of an asset's life compared to straight-line depreciation, which spreads expenses evenly. Methods like double-declining balance result in higher expenses initially that decrease over time. This aligns depreciation with an asset's actual heavier use when new. Companies may use accelerated depreciation to defer taxes by reporting lower income in early periods.

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    © All Rights Reserved
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    Download as docx, pdf, or txt
    of 1

    What Is Accelerated Depreciation?

    Accelerated depreciation is any method of depreciation used for accounting or


    income tax purposes that allows greater depreciation expenses in the early years
    of the life of an asset. Accelerated depreciation methods, such as double-
    declining balance (DDB), means there will be higher depreciation expenses in
    the first few years and lower expenses as the asset ages. This is unlike
    the straight-line depreciation method, which spreads the cost evenly over the life
    of an asset.

    KEY TAKEAWAYS

     Accelerated depreciation is any depreciation method that allows for the


    recognition of higher depreciation expenses during the earlier years. 
     The key accelerated depreciation methods include double-declining
    balance and sum of the years’ digits (SYD). 
     Accelerated depreciation is unlike the straight-line depreciation method,
    where the latter spreads the depreciation expenses evenly over the life of
    the asset.  
     Companies may use accelerated depreciation for tax purposes, as these
    methods result in a deferment of tax liabilities since income is lower in
    earlier periods.
    Understanding Accelerated Depreciation
    Accelerated depreciation methods tend to align the recognized rate of an asset’s
    depreciation with its actual use, although this isn’t technically required. This
    alignment tends to occur because an asset is most heavily used when it’s new,
    functional, and most efficient. 

    Because this tends to occur at the beginning of the asset’s life, the rationale
    behind an accelerated method of depreciation is that it appropriately matches
    how the underlying asset is used. As an asset age, it is not used as heavily,
    since it is slowly phased out for newer assets.

    Special Considerations
    Using an accelerated depreciation method has financial reporting implications.
    Because depreciation is accelerated, expenses are higher in earlier periods
    compared to later periods. Companies may utilize this strategy for taxation
    purposes, as an accelerated depreciation method will result in a deferment of tax
    liabilities since income is lower in earlier periods.

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