- What is the difference between straight-line and declining balance depreciation?
- Straight-line deducts equal amounts each year. Declining balance (double-declining-balance, or 200% DB) deducts a fixed percentage of the remaining book value each year, front-loading depreciation. MACRS uses 200% DB switching to straight-line at the optimal crossover point.
- What is salvage value?
- The estimated residual value of an asset at the end of its useful life. Straight-line depreciation = (Cost - Salvage Value) / Useful Life Years. Declining balance methods often depreciate to zero (no salvage value assumed for tax purposes).
- Can I depreciate a leased asset?
- Under GAAP ASC 842 and IFRS 16, operating leases create right-of-use assets that are amortized. Finance leases and owned assets use traditional depreciation. Lease vs own decisions have significant accounting and tax implications beyond depreciation alone.