Money Infant

Baby Steps to Financial Freedom

Units of Time Depreciation

This is similar to the units of production depreciation method, except it uses the amount of time an asset is used to calculate depreciation. This can be very useful for assets that are not used equally from year to year and this method is frequently used by construction companies, mining companies and natural resource exploration companies.

The usefulness of this type of depreciation can easily be seen if you consider a construction company. They may have certain assets which are used for very specific purposes and depending on their projects this asset may be used quite extensively one year and then sparingly or not at all the following year. In this case it may make more sense to only depreciate the asset when it is actually in use.

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