A Comparison of Accelerated Depreciation Methods with the Conventional Straight-Line Method

Between accelerated and straight-line depreciation, there are significant differences. A straight-line depreciation technique, as the name suggests, provides for a consistent amount to be depreciated in each period, but an accelerated depreciation approach allows for a significantly higher amount to be depreciated in the first few years. Second, the calculation of accelerated depreciation is more difficult than that of straight-line depreciation. And third, straightline depreciation depicts utilisation more accurately than accelerated depreciation, which is less likely to reflect the real usage pattern of the underlying assets.

Compare the straight-line depreciation to the accelerated methods of depreciation using the same example of a machine worth $100,000 with an estimated salvage value of $10,000 and a usable life of five years.

A table showing the annual depreciation amounts for each approach: