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Choosing between methods of depreciation

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There is a common scenario where companies can opt to use two different depreciation methods. What is this scenario and can you share some details and the rationale behind this scenario?

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Solution Summary

This solution discusses if and when a company can opt to use two different methods of depreciation. The scenario is thoroughly examined and explained.

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Most companies either use straight line depreciation (SL) or the double declining balance (DDB) method. Both are approved methods under MACRS, which is the current tax depreciation method used today. When companies use SL depreciation, they do so because it is easy to calculate. This enables start-up companies to begin depreciating assets without much knowledge. SL is depreciated as cost / number of years. Under MACRS, which is the most commonly used ...

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