Understanding Depreciation Methods

Master the theory, formulas, and decision rules — then practice in the interactive playground.

1 Decision Flow: Which Method to Use?
What type of asset?
Is usage measurable?
▼ YES
Units of Production (UOP)
▼ NO
Equal annual charges?
▼ YES
Straight-Line (SLD)
▼ NO
Loose tools / small assets?
▼ YES
Revaluation (REV)
▼ NO
Accelerated needed?
▼ YES
Most aggressive?
▼ YES
Double Declining (DDB)
▼ NO
Fixed declining fraction preferred?
▼ YES
Sum-of-Years' Digits (SYD)
▼ NO
Reducing Balance (RB)
▼ NO
Straight-Line (SLD)
2 The Six Depreciation Methods
SL
Straight-Line
SLD
The asset loses the same amount every year. Simple, predictable, most common.
Annual Depr = (Cost − Residual) ÷ Life
💡 Subtract residual BEFORE dividing 📌 Book value hits residual exactly at end
RB
Reducing Balance
RB
Fixed % on remaining book value each year. Higher charges early, lower later.
Depr = Rate% × Opening Book Value
💡 Formula alone never reaches residual — final year(s) may need adjustment 📌 Rate = 1 − ⁿ√(Residual/Cost)
DD
Double Declining Balance
DDB
2× the straight-line rate on declining balance. Switches to SLD when optimal.
Rate = 2 ÷ Life
Depr = Rate × Book Value
💡 Don't subtract residual from BV before applying rate 📌 Switch-over year is key exam Q
SY
Sum-of-Years' Digits
SYD
Fraction of remaining life × depreciable amount. Front-loaded charges.
Depr = (Rem.Life ÷ SYD) × (Cost − Residual)
💡 SYD = n(n+1)/2 📌 Fractions sum to exactly 1
UP
Units of Production
UOP
Depreciation tied to actual output/usage. Varies each year.
Rate/unit = (Cost − Res) ÷ Total Units
💡 Book value stops at residual 📌 No fixed 'life' concept
RV
Revaluation
REV
Asset revalued at year-end. Depreciation = opening − closing.
Depr = Opening + Additions − Closing
💡 Add purchases first 📌 No residual or life needed
3 Quick Comparison
Method Equal? Accelerated? Needs Rate? Time-based? Best For
SLD ✓ Yes ✗ ✗ ✓ Buildings, furniture
RB ✗ ✓ Yes ✓ ✓ Tech, vehicles
DDB ✗ ✓✓ Auto ✓ Tax deferral, US GAAP
SYD ✗ ✓ ✗ ✓ Exams, declining-benefit assets
UOP Varies — ✗ Usage Machinery, mines
REV Varies — ✗ ✗ Loose tools, crockery

⚠ Important Distinction

📉
Depreciation (IAS 16)
Amortissement
Systematic allocation of depreciable amount over useful life. Planned, expected, and recorded each accounting period. Reflects the pattern of economic benefits consumed.
📌 Routine — every year 📌 Based on useful life 📌 Cannot reverse (but estimates can be revised prospectively per IAS 8)
⚡
Impairment (IAS 36)
Dépréciation
Unexpected decline when recoverable amount falls below carrying amount. Event-driven (flood, obsolescence, market crash). Immediate write-down to recoverable amount.
📌 Event-triggered 📌 Immediate recognition 📌 Can reverse (except goodwill)
Key exam point: After impairment, depreciation continues on the new (lower) carrying amount over the remaining useful life. Both IAS 16 and IAS 36 can apply to the same asset simultaneously. In OHADA/SYSCOHADA, impairment uses account 6914 (Dotations aux provisions pour dépréciation des immobilisations corporelles) credited to 2914.
Currency optional

Asset Details

5 years

Dates & Timing

Convention: month of acquisition counts as a full month (nearest-month method).

Disposal / Cession ▶

🔄 Change in Estimate ▶

Methods to Display

🎓 Teacher Scenario
Answers visible