Accelerated Depreciation


A depreciation method which allows faster write-offs than the straight line method. These methods provide a greater tax shield effect than straight line depreciation, and so companies with large tax burdens might like to use accelerated depreciation methods, even if it reduces the income shown on financial statement. Accelerated depreciation methods are popular for writing-off equipment that might be replaced before the end of its useful life since the equipment might be obsolete (e.g. computers). One example of an accelerated depreciation method is the Modified Accelerated Cost Recovery System (MACRS).

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The accelerated depreciation method was a lot better than the straight line method and I explained that to them thoroughly.

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The accelerated depreciation method was used primarily for the tax benefits however the machinery had more life in it that the books indicated.

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When Big C Construction purchased a very large front end loader, Jim, from accounting recommended to his boss that they use the accelerated depreciation method in an effort to offset some of the profit from the new line of business that this front end loader would allow them to take on. They would take the largest amount of depreciation in the first couple of years when the business was the best in order to lessen their tax liability.

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