Para el cálculo de la depreciación, se pueden utilizar diferentes métodos como la línea recta, la reducción de saldos, la suma de los dígitos y método de unidades de producción entre otros.

Sum of year digits method

This is an accelerated depreciation method that seeks to determine a higher depreciation rate in the first years of the asset's useful life. The formula that is applied is:

Where the sum of the digits is equal to the sum of the useful life plus the useful life minus 1; until it is equal to 0.

Balance reduction method

This is another method that allows accelerated depreciation. For its implementation, it necessarily requires the use of a salvage value, otherwise 100% of the asset would be depreciated in the first year, making this method no longer valid.

The formula to use is the following:

Where is the useful life of the asset.

As you can see, the first thing to do is determine the depreciation rate, and then apply that rate to the undepreciated value of the asset or undepreciated balance or it will not depreciate until the following year.

Units of production method

This method is the same as the straight line method in that the depreciation is distributed equally in each of the periods.

To determine depreciation by this method, the value of the asset is first divided by the number of units it can produce during its entire useful life. Then, in each period, the number of units produced in the period is multiplied by the depreciation cost corresponding to each unit.

Example: You have a machine valued at $10,000,000 that can produce 20,000 units throughout its useful life.

So, $10,000,000/20,000 = $500. It means that each unit produced is charged a depreciation cost of $500.

If in the first period, the units produced by the machine were 2,000, we have that the depreciation for the first period is: 2,000 * 500 = 1,000,000, and so on in each period.

It assumes that depreciation is a function of use or productivity and not the passage of time. The life of the asset is considered in terms of its performance (units it produces) or the number of hours it works. Conceptually, the appropriate cost association is established in terms of performance and not hours of use; but many times production is not homogeneous and is difficult to measure.

(Cost less scrap value) X hours of use in the year = charge for Total estimated hours or depreciation.

Linear method

This method overcomes some of the objections to the activity-based method because depreciation is considered a function of time rather than use. This method is widely applied in practice due to its simplicity. The straight line procedure is also often justified on a more theoretical basis. When progressive obsolescence is the primary cause of a limited service unit, the decline in usefulness may be constant from period to period. In this case the straight line method is appropriate. The depreciation charge is calculated as follows:

Original Historical Cost less scrap value, all of this between the useful life (given life of the asset) = Depreciation charge for the estimated service life.

This simple method is based on determining the fee that is proportional (equal or constant) based on the estimated useful life.

Para el cálculo de la depreciación, se pueden utilizar diferentes métodos como la línea recta, la reducción de saldos, la suma de los dígitos y método de unidades de producción entre otros.

Sum of year digits method

This is an accelerated depreciation method that seeks to determine a higher depreciation rate in the first years of the asset's useful life. The formula that is applied is:

Where the sum of the digits is equal to the sum of the useful life plus the useful life minus 1; until it is equal to 0.

Balance reduction method

This is another method that allows accelerated depreciation. For its implementation, it necessarily requires the use of a salvage value, otherwise 100% of the asset would be depreciated in the first year, making this method no longer valid.

The formula to use is the following:

Where is the useful life of the asset.

As you can see, the first thing to do is determine the depreciation rate, and then apply that rate to the undepreciated value of the asset or undepreciated balance or it will not depreciate until the following year.

Units of production method

This method is the same as the straight line method in that the depreciation is distributed equally in each of the periods.

To determine depreciation by this method, the value of the asset is first divided by the number of units it can produce during its entire useful life. Then, in each period, the number of units produced in the period is multiplied by the depreciation cost corresponding to each unit.

Example: You have a machine valued at $10,000,000 that can produce 20,000 units throughout its useful life.

So, $10,000,000/20,000 = $500. It means that each unit produced is charged a depreciation cost of $500.

If in the first period, the units produced by the machine were 2,000, we have that the depreciation for the first period is: 2,000 * 500 = 1,000,000, and so on in each period.

It assumes that depreciation is a function of use or productivity and not the passage of time. The life of the asset is considered in terms of its performance (units it produces) or the number of hours it works. Conceptually, the appropriate cost association is established in terms of performance and not hours of use; but many times production is not homogeneous and is difficult to measure.

(Cost less scrap value) X hours of use in the year = charge for Total estimated hours or depreciation.

Linear method

This method overcomes some of the objections to the activity-based method because depreciation is considered a function of time rather than use. This method is widely applied in practice due to its simplicity. The straight line procedure is also often justified on a more theoretical basis. When progressive obsolescence is the primary cause of a limited service unit, the decline in usefulness may be constant from period to period. In this case the straight line method is appropriate. The depreciation charge is calculated as follows:

Original Historical Cost less scrap value, all of this between the useful life (given life of the asset) = Depreciation charge for the estimated service life.

This simple method is based on determining the fee that is proportional (equal or constant) based on the estimated useful life.