UK Accounting Glossary
Method that records greater depreciation than straight-line depreciation in the early years and less depreciation than straight-line in the later years of an asset’s holding period.
A rate of depreciation of assets that is faster than the useful-life basis normally used to calculate depreciation.
For example: a laptop may be expected to have a useful life of four years when it’s first purchased; however, as a result of new innovations in laptop products, it’s instead replaced after two years.
If the useful life basis had been used, the full cost would not have been charged to the accounts until the end of the fourth year; by accelerating the depreciation the full charge would be made earlier, thus reflecting the short life cycle of high-tech products.
In the US, accelerated depreciation is sometimes used to gain tax advantages.
Accelerated depreciation is a depreciation method whereby an asset loses book value at a faster rate than the traditional straight-line method.
Generally, this method allows greater deductions in the earlier years of an asset and is used to minimise taxable income.
For example; a laptop computer may be expected to have a useful life of 4 years when it is first purchased, however, as a result of new product innovations, it is replaced after just two years.
If the useful life basis had been used, the full cost wouldn’t have been charged to the accounts until the end of the 4th year; By accelerating depreciation the full charge can be made earlier, thus reflecting the short shelflife of high-tech products.
In the US, the accelerated deprecation method may be used to gain tax advantages.
Some companies desire accelerated depreciation and a cessation to the corporate minimum tax.
Many businesses are pushing hard for enhanced accelerated depreciation allowances for plants, machinery and equipment.
Accelerated depreciation is utilised in some countries in order to encourage growth into renewable energy.
The idea of accelerating depreciation was backed by the national lobby group; The National Association of Manufacturers.
Accelerated depreciation is hardly a new concept.
Accelerated depreciation can often provide tax benefits for manufacturing businesses.
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Definitions for Accelerated Depreciation are sourced/syndicated from:
This glossary post was last updated: 26th December 2018.