Inland Revenue (2007, page 43) indicates that telecommunications equipment with a 10 year economic life would be eligible for straight-line depreciation
at the rate of 15% per year, and this depreciation process would then be completed in almost seven years.
This situation reverses in later years when the straight-line depreciation
expense is greater than accelerated depreciation expense.
The straight-line depreciation
election is easy to make but difficult to revoke.
This method is implemented until the first year in which the straight-line depreciation
of the not-yet-depreciated cost exceeds the depreciation under the declining balance method.
Since this estimation error is simply an artifact of the computational mathematics of straight-line depreciation
compared to the mathematics of nonlinear depreciation implicit in the present value calculation, it can be specified as purely a function of time independent of the characteristics of the property being appraised.
For example, with straight-line depreciation
, depreciation in the first year is equal to depreciation in the second year, which is equal to depreciation in the third year, and so on.
K], such measures are problematic because mechanical book value measures bear no necessary relationship to the remaining asset financial value after adjusting for true economic depreciation--unless of course the latter should happen to coincide with a straight-line depreciation
Only the straight-line depreciation
method is now acceptable unless the federal cognizant agency grants an exception for unusual circumstances.
To generate these data, we used a straight-line depreciation
of 7 years and the rule of thumb of 10% of the initial capital costs as the expense for an annual maintenance contract.
Accelerated depreciation - any pattern of depreciation that writes off depreciable assets more quickly than straight-line depreciation
For commercial property that is placed in service after mid-1993, the straight-line depreciation
period has been increased from 31.