Straight-line depreciation
Straight-line depreciation allocates an equal amount of the depreciable amount to each full year of useful life when benefits are consumed evenly. Annual charge = (cost or substituted amount − residual value) ÷ useful life. Apportion the charge when required for an asset available for use for only part of the reporting period. Revisions of useful life or residual value affect future charges.
Worked example
An asset costs $26,000, has residual value $2,000 and a six-year life. Annual depreciation is $4,000; three months gives $1,000.
Common mistake
Do not calculate annual depreciation as cost divided by life when a non-zero residual value has been specified.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | F1 | Direct | July 2027–August 2028 |
| ACCA | F2 | Supporting | July 2027–August 2028 |
| ACCA | F3 | Supporting | July 2027–August 2028 |
| ACCA | FA | Direct | September 2026–June 2027 |
| ACCA | K1 | Direct | July 2027–August 2028 |
| CIMA | BA3 | Direct | Official assessment-window verification pending |
| CIMA | F1 | Direct | Official assessment-window verification pending |
| FIA | FFA | Direct | September 2026–June 2027 |
Related terms
Also called: Straight-line method, Depreciation straight line method