固定资产折旧管理(英文).docVIP

Depreciation By: John Powell and Alan Sun Mathematics of Finance Dr. Janusz Kawczak Abstract Depreciation is the decline in value of an object over time and can be calculated in many different methods. However, these methods are all estimates of an objects value or “Book Value”, and can differ widely. Due to the importance of Depreciation in today’s financial world, we decided to utilize each method of Depreciation and find the most effective method. To achieve this, we used a test case and used its variable to find the annual depreciations that would occur for each method. Once the results were found, the comparison showed that the Straight Line Method of Depreciation, where there is an uniform annual decline of value over a set period of time, is the most efficient and beneficial method. This conclusion reinforces the current beliefs in the financial world. Background Depreciation is the term used to describe the decline in value of a physical asset over a certain span of time. Most objects lose value as they are used due to damage from use, aging, obsolescence, and impairment. However the exact amount of value that is lost and the current “book value” of an asset cannot be easily known. Depreciation is thus used as an estimate of this decline and is used for several important purposes in today’s business world. Depreciation has been a factor in human economics ever since the advent of trade. At its most basic, depreciation states that an older object is usually not as valuable as a newer one. However, with the formation of large corporations and the creation of our modern economic structure, depreciation has taken on a greater importance with a genuine need for accurate calculations of depreciation. Today most companies need a precise estimate of their physical assets’ depreciation for two main reasons. First, companies must compare the expenses in using and buying equipment and materials to the revenue generated in that year. Without an accurate estimate for