What Is Accelerated Depreciation?

Accelerated depreciation is any method of depreciation used for accounting or income

tax purposes that allows greater depreciation expenses in the early years of the life of
an asset. Accelerated depreciation methods, such as double-declining balance (DDB),
means there will be higher depreciation expenses in the first few years and lower
expenses as the asset ages. This is unlike the straight-line depreciation method, which
spreads the cost evenly over the life of an asset.

KEY TAKEAWAYS

 Accelerated depreciation is any depreciation method that allows for the

recognition of higher depreciation expenses during the earlier years. 
 The key accelerated depreciation methods include double-declining balance and
sum of the years’ digits (SYD). 
 Accelerated depreciation is unlike the straight-line depreciation method, where
the latter spreads the depreciation expenses evenly over the life of the asset.  
 Companies may use accelerated depreciation for tax purposes, as these
methods result in a deferment of tax liabilities since income is lower in earlier
periods.
Understanding Accelerated Depreciation
Accelerated depreciation methods tend to align the recognized rate of an asset’s
depreciation with its actual use, although this isn’t technically required. This alignment
tends to occur because an asset is most heavily used when it’s new, functional, and
most efficient. 

Because this tends to occur at the beginning of the asset’s life, the rationale behind an
accelerated method of depreciation is that it appropriately matches how the underlying
asset is used. As an asset age, it is not used as heavily, since it is slowly phased out for
newer assets.

Special Considerations
Using an accelerated depreciation method has financial reporting implications. Because
depreciation is accelerated, expenses are higher in earlier periods compared to later
periods. Companies may utilize this strategy for taxation purposes, as an accelerated
depreciation method will result in a deferment of tax liabilities since income is lower in
earlier periods.