Reply: Order of Depreciation Methods.

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Message	Write Preview [quote="Cornelius Fichtner" post=4298]Hi Ashwin, I believe that your question is outside of what you need to know for the PMP Exam. However, here is my understanding: First of all, the depreciation method you use has less to do with "which one is fastest" but more with "which one is permissible". Depreciation affects your company's taxable income and therefore it is your local tax authority that will tell you which of the methods you are allowed to use in which circumstances. Second, if you depreciate an asset over five years then the value of the asset will be 0 at the end of the five years no matter which method you use. And third, it is my understanding that the double declining balance method depreciates more in the early years than the other two. The sum of years method is second and straight line is third. (But again... you don't need this for the PMP exam).[/quote]

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9 years 10 months ago #4298
Cornelius Fichtner	Hi Ashwin, I believe that your question is outside of what you need to know for the PMP Exam. However, here is my understanding: First of all, the depreciation method you use has less to do with "which one is fastest" but more with "which one is permissible". Depreciation affects your company's taxable income and therefore it is your local tax authority that will tell you which of the methods you are allowed to use in which circumstances. Second, if you depreciate an asset over five years then the value of the asset will be 0 at the end of the five years no matter which method you use. And third, it is my understanding that the double declining balance method depreciates more in the early years than the other two. The sum of years method is second and straight line is third. (But again... you don't need this for the PMP exam).

9 years 10 months ago #4298

Cornelius Fichtner

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Hi Ashwin,

I believe that your question is outside of what you need to know for the PMP Exam. However, here is my understanding:

First of all, the depreciation method you use has less to do with "which one is fastest" but more with "which one is permissible". Depreciation affects your company's taxable income and therefore it is your local tax authority that will tell you which of the methods you are allowed to use in which circumstances.

Second, if you depreciate an asset over five years then the value of the asset will be 0 at the end of the five years no matter which method you use.

And third, it is my understanding that the double declining balance method depreciates more in the early years than the other two. The sum of years method is second and straight line is third. (But again... you don't need this for the PMP exam).

9 years 10 months ago #4297
Ashwin Kini	Do we have a defined order of Depreciation Methods that provides higher write-offs early in order of it's acceleration?

9 years 10 months ago #4297

Ashwin Kini

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Do we have a defined order of Depreciation Methods that provides higher write-offs early in order of it's acceleration?

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Order of Depreciation Methods.