Different methods change when the same supported depreciable amount reaches expense. Straight-line assigns equal amounts to equal full periods when service is expected evenly. Units of production follows measured activity. An accelerated method assigns more to earlier periods when the supported pattern is front-loaded.
For $105,000 cost, $5,000 residual value, five-year life, and 50,000 estimated units, straight-line is $20,000 per full year and the activity rate is $2 per unit. Production of 14,000 units produces $28,000 of activity-based depreciation. A double-declining schedule begins with a 40% rate on opening carrying amount but must be controlled so carrying amount does not fall below the supported residual value.
Method comparisons require a common asset, start date, estimates, and period. They illuminate expense timing, margins, carrying amount, and asset turnover; they do not identify cash generation or economic value. A justified later change in method or estimate needs Topic 250 analysis, while a mathematical or data-input mistake raises an error question.
The standard requires systematic and rational cost allocation and separates allocation from valuation. ASC 360-10-35-4 states that foundation. Paragraph 35-7 explains when a declining-balance pattern can be satisfactory. Paragraph 35-9 prevents an unsuitable tax recovery period from becoming book depreciation. Those paragraphs do not select the method for a particular asset. The service- pattern evidence must support that conclusion.
Compare the methods in the Linden Peak worked example, then reconcile the independent Quarry Systems practice.
Put the concept to work
Understand this concept
- Compare straight-line, activity-based, and accelerated depreciation as allocation patterns without interpreting any method as a market-value forecast.
Apply this concept
- Prepare reconciled straight-line, units-of-production, and declining-balance schedules from supplied estimates and interpret timing differences across methods.
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- Depreciation — Apply
To apply this concept: Required. All schedules must preserve depreciable amount and carrying-amount controls.
- Depreciation — Understand
To understand this concept: Required. Method selection makes sense only after depreciation is understood as allocation rather than valuation.
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- Activity-method depreciation — Understand
Required level here: understand. Required. A named method is one pattern within the general choice.
- Declining-balance depreciation — Understand
Required level here: understand. Required. A named method is one pattern within the general choice.
- Group and composite depreciation — Understand
Required level here: apply. Required. The pooled rate derives from the same cost, residual, life, and allocation mechanics applied across multiple assets.
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- Partial-period depreciation — Apply
Required level here: apply. Required. The full-period allocation must be correct before it is time-weighted.
- Straight-line depreciation — Understand
Required level here: understand. Required. A named method is one pattern within the general choice.
- Sum-of-the-years'-digits depreciation — Understand
Required level here: understand. Required. A named method is one pattern within the general choice.