Depreciation method: companies must use straight line or written down value; unit-of-production method disallowed to prevent manipulation. Companies must charge depreciation using either the Straight Line Method or the Written Down Value method; the Unit of Production method is disallowed. The Department reasons that depreciation represents loss of value over time, a concept not reliably captured by a production-based approach which can imply no depreciation in non-production years, extend asset life beyond the period underlying prescribed rates, and enable profit manipulation through estimated production and technical assumptions.
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Depreciation method: companies must use straight line or written down value; unit-of-production method disallowed to prevent manipulation.
Companies must charge depreciation using either the Straight Line Method or the Written Down Value method; the Unit of Production method is disallowed. The Department reasons that depreciation represents loss of value over time, a concept not reliably captured by a production-based approach which can imply no depreciation in non-production years, extend asset life beyond the period underlying prescribed rates, and enable profit manipulation through estimated production and technical assumptions.
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