A Comprehensive Guide to Accelerated Depreciation

Accelerated depreciation is frequently employed as a tax-saving technique. A capital asset's book value is decreased by utilizing the accelerated depreciation technique more quickly (than it would use conventional depreciation methods as the straight-line method). As a result, under accelerated depreciation, an asset will see bigger value reductions in the early years compared to the later years. Accelerated depreciation tends to inflate a company's reported results and show lower profits than would otherwise be. Long-term, as long as a corporation keeps buying and selling assets at a constant rate, this is not the case. A company that uses accelerated depreciation should have its cash flows carefully reviewed, as shown on its statement of cash flows. As this blog illustrates, numerous methods for calculating accelerated depreciation include the twofold declining balance method and the total of the years' digits method.