Accelerated Depreciation

Is accelerated depreciation multiplied by the carrying value of an asset or its total value?

i.e. if we have an asset worth $25,000 with a useful life of 5 years and a salvage value of $5,000 using an accelerated rate of depreciation of 0% what is the assets NBV in every year?

From my understanding, depreciation expense would be:

Y1: 20,000 x 0.30 = $6,000

Y2: 14,000 x 0.30 = $4,200

Y3: 9,800 x 0.30 = $2, 940

and so on. However in one of the Schweser questions (in calculating the tax base), it calculates accelerated depreciation on the total value for each year i.e.

Y1: 20,000 x 0.30 = $6,000

Y2: 20,000 x 0.30 = $6,000

Y3: 20,000 x 0.30 = $6,000

This doesn’t make any sense to me… Can somebody please explain?

It’s calculated on the carrying value, not on the original value.

On what page did you find the Schweser example you mention?

It was a question on the Schweser Qbank…

I too saw two conflicting calculation methods.

My understanding was - or this is what I figured out but was not very content with this:

  • that for accounting purposes the accelerated method is calculated like: NBV from last year x depr. rate%

  • while for taxation (so when we look for DTL) we use the “accelerated method” by calculating: original value x depr. rate% for each year.

I’m not able to dig out the question but I made a note from it on my flashcard so I’m sure there was a solution like this.