Talk:Depreciation/Archives/2014
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Other Methods
I will expand these, this is just a place to work -- ∞Dbroadwell 16:39, 29 April 2006 (UTC)
- Units of production
- Units of operating time
I'm not sure I like Depreciation on the basis of 'operating time' since that seems to allow a company to not charge any depreciation in a year if the asset has not been used. Are there really companies out there that use this method or is it just an academic theory? Anthony 17:36, 2 November 2007 (UTC)
Whether it's actually used or not I don't know, but this would be an appropriate method for something like an airplane engine which has a maximum operating time between overhauls. Dsliesse (talk) 18:18, 22 March 2014 (UTC)dsliesse
Wear and tear
I disagree with the statement "Depreciation in accounting is often mistakenly seen as a basis for recognizing "wear and tear"". This is in fact the idea: it is the basis for recognizing wear and tear, and is the representation of it in accounting terms. What is mistaken is the notion that it is identical to wear and tear, or that the carrying value (purchase minus accumulated depreciation) equals the actual value. Is something else meant by this statement?
Actually, the context under which the statement was made makes perfect sense. The original statement referred specifically to software, which doesn't wear out. It will run forever, assuming the required hardware and operating system are still available. But that doesn't mean its useful life is infinite. As an example, consider tax software. This year's tax software obviously is useful, but software from 10 years ago is of very little value. Its actual useful life is subject to debate; it could be 1 year, 3 years (based on certain rules for filing taxes), 4 years (based on the timing of those same rules), or 10 or 11 years (pretty much the outer limit for tax questions).
In point of fact most software will be fully expensed in the first year under Section 179 (US tax code -- I can't speak to the rules of other countries), but I'm just trying to illustrate the point.