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.