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Non-current assets: Acquisition and depreciation

3.4 Reducing-balance method

 Some assets give a greater service – and therefore depreciate more – in their
early years than they do in later years. For this reason, it is considered
reasonable to charge a higher amount of depreciation in the earlier years.

 This is a common method of depreciation for vehicles, where it is expected that
they will provide less service to the entity as they age because of the increased
need to service/repair them as their mileage increases.

 The amount to be charged to each accounting period is calculated as follows:

Depreciation per annum = X% × carrying value

Note: Carrying value = original cost of the non-current asset less accumulated
depreciation for the asset to date.

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