What is Accelerated Depreciation?

Early on in their useful lifespan, fixed assets depreciate more quickly due to accelerated depreciation. This kind of depreciation lowers the amount of taxable revenue early in an asset’s life, deferring tax obligations to later periods. The effect reverses later, so there will be less depreciation available to conceal taxable income once the majority of the depreciation has already been recorded. The end result is that a corporation eventually has to pay more in income taxes. As a result, the net result of accelerated depreciation is the postponement of income taxes. The fact that accelerated depreciation may genuinely match the usage pattern of the underlying assets, which involves more usage early in their useful lives, is another justification for using this concept.