declining-balance method

Examples of declining-balance method in the following topics:

• Depreciation

  • Methods of computing depreciation may vary by asset for the same business.
  • Several standard methods of computing depreciation expense may be used, such as fixed percentage, straight line, and declining balance methods.
  • One popular accelerated method is the declining-balance method.
  • Under this method the book value is multiplied by a fixed rate.
  • Sum-of-years' digits is a depreciation method that results in a more accelerated write-off than straight line, but less than the declining-balance 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.
  • Sum-of-years' digits is a depreciation method that results in a more accelerated write-off than straight line, but less accelerated than that of the double-declining balance method.
  • The double-declining balance method is a type of accelerated depreciation method that calculates a higher depreciation charge in the first year of an asset's life and gradually decreases depreciation expense in subsequent years.
  • With double-declining-balance, double that rate to arrive at 40%.
  • 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.

• Depreciation

  • There are several methods for achieving this goal.
  • The straight-line method of depreciation reduces the book value of an asset by the same amount each period.
  • The declining balance method of depreciation provides for a higher depreciation expense in the first year of an asset's life and gradually decreases expenses in subsequent years.
  • Since the declining balance method will never fully amortize the original cost of the asset, the salvage value is not considered in determining the annual depreciation.
  • Activity depreciation methods are not based on time, but on a level of activity.

• Impact of Depreciation Method

  • The choice of depreciation method can impact revenues on the income statement and assets on the balance sheet.
  • 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.
  • 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.
  • Double-declining balance is a type of accelerated depreciation method.

• Market Value vs. Book Value

  • In accounting, book value or carrying value is the value of an asset according to its balance sheet account balance.
  • 4 Depreciation methods (1.
  • Straight-Line method, (2.
  • Double-Declining Balance method, (3.
  • Sum-of-the-Years' Digits method, (4.Productive output method)

• Depreciation

  • Depreciation is any method of allocating net cost to those periods expected to benefit from use of the asset.
  • Methods of computing depreciation may vary by asset for the same business.
  • Methods may be specified in the accounting or tax rules of a country.
  • Several standard methods of computing depreciation expense may be used, including:

• 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.
  • This amount is disclosed on the income statement and is part of the asset's accumulated depreciation on the balance sheet.
  • To calculate depreciation using the double-declining method, its possible to double the amount of depreciation expense under the straight-line method.
  • Next, apply the resulting double-declining rate to the declining book value of the asset (cost subtracted by accumulated depreciation).

• Financing Balance-of-Payments Deficits and Surpluses

  • If a country experiences a balance-of-payment deficit, then its currency tends to depreciate over time, causing exports to increase while imports decline.
  • On the other hand, a balance-of-payment surplus does the exact opposite.
  • For instance, a country is experiencing a balance-of-payments deficit.
  • Consequently, the financial account falls until the balance-of-payments surplus approaches zero.
  • International investors use several methods to cash out investments from a foreign country, which include:

• 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 are amortized to reflect their consumption, expiry, obsolescence or other decline in value as a result of use or the passage of time, process which is similar to the deprecation process for tangible assets.
  • Limited-life intangibles are systemically amortized throughout the useful life of the intangible asset using either units of activity method or straight-line method.
  • When an intangible asset's impairment reverses and value is regained, the increase in value is recorded as a gain on the income statement and reduction to accumulated impairment loss on the balance sheet, up to the amount of impairment loss recorded in prior periods.
  • Increases in value in excess of prior impairment loss are debited directly to the asset and credited to a revaluation reserve account in the equity section of the balance sheet.

• Disinvestment and Deindustrialization

  • Third, deindustrialization can be marked by a balance of trade deficit, or a situation in which a country imports more manufactured products than it exports.
  • Finally, deindustrialization can be observed when a nation's balance of trade deficit is so sustained that the country is unable to pay for the necessary imports of materials needed to further produce goods, initiating a downward spiral of economic decline.
  • As economies that were once industrial improve their methods through technological innovation, businesses will find ways to increase productivity or product growth while decreasing the amount of resources they need to devote to production.
  • The decline in employment in manufacturing sectors that comes about from this progress can indicate deindustrialization.
  • The number of American workers in the manufacturing industry has declined steadily from its peak of 31.5 million in 2000.