straight-line method

(noun)

the company charges the same amount to depreciation each year over that period until the value shown for the asset has reduced from the original cost to the salvage value

Related Terms

Examples of straight-line method in the following topics:

  • Impact of Depreciation Method

    • The four most common methods of depreciation that impact revenues and assets are: straight line, units of production, sum-of-years-digits, and double-declining balance.
    • Here is an example of how to calculate depreciation expense under the straight-line method.
    • Sum-of-years digits is a depreciation method that results in a more accelerated write off of the asset than straight line but less than double-declining balance method.
    • This method will reduce revenues and assets more rapidly than the straight-line method but not as rapidly as the double-declining method.
    • To calculate depreciation using the double-declining method, its possible to double the amount of depreciation expense under the straight-line method.

  • Limited-Life Impairment

    • Limited-life intangibles are amortized throughout the useful life of the intangible asset using either the units of activity or the straight-line method.
    • Intangible assets with a limited-life are amortized on a straight-line basis over their economic or legal life, based on whichever is shorter.
    • Limited-life intangibles are systemically amortized throughout the useful life of the intangible asset using either units of activity method or straight-line method.

  • Methods of Depreciation

    • Some of the most common methods used to calculate depreciation are straight-line, units-of-production, sum-of-years digits, and double-declining balance, an accelerated depreciation method.
    • Straight-line depreciation has been the most widely used depreciation method in the U.S. for many years due to its simplicity.
    • To apply the straight-line method, a company charges an equal amount of the asset's cost to each accounting period.
    • First, calculate the straight-line depreciation rate.
    • The deduction for depreciation is computed under one of two methods (declining balance switched to straight line or only straight line ) at the election of the taxpayer.

  • Factors for Calculating Depreciation

    • Most companies use the straight-line method for financial reporting purposes, but they may also use different methods for different assets.
    • The following four methods allocate asset cost in a systematic and rational manner: straight line, units of production, sum-of-years-digits, and double-declining balance.
    • Here is an example of how to calculate depreciation expense under the straight-line method.
    • To calculate depreciation using the double-declining method, its possible to double the amount of depreciation expense under the straight-line method.
    • Summarize how a company would determine the appropriate depreciation method to use

  • What Is Depreciation?

    • Depreciation expense can be calculated using a variety of methods.
    • The depreciation method chosen should be appropriate to the asset type, its expected business use, its estimated useful life, and the asset's residual value.
    • A depreciation method commonly used to calculate depreciation expense is the straight line method.

  • Valuing Repairs, Maintenance, and Additions

    • This asset had been depreciated using the straight-line method for one year and had a book value of USD 30,000 (USD 40,000 cost—USD 10,000 first-year depreciation) at the beginning of 2010.

  • Copyrights

    • Generally, an intangible asset like a copyright is amortized via the straight-line method.

  • Overview of Lease Accounting

    • If an operating lease has scheduled changes in rent, normally the rent must be registered as an expense on a straight-line basis over its life, with a deferred liability or asset reported on the balance sheet for the difference between expense and cash outlay.
    • Classified as an asset; amortized using the straight-line method over the life of the lease.

  • Reporting Assets

    • Finally a business must choose a depreciation method.
    • The most common depreciation method type is "straight-line," where the depreciation rate is calculated by subtracting the asset's residual value from its acquisition cost and dividing the result by its useful life.

  • Analyzing Intangible Assets

    • Intangibles with identifiable useful lives are amortized on a straight-line basis over their economic or legal life, whichever is shorter.
    • Those with identifiable useful lives are amortized on a straight-line basis over their economic or legal life, whichever one is shorter.