Short-Cut Approaches To Calculating Depreciation In The Cost Method Of Valuation

In financial reporting an asset has cost or value if it can be measured reliably. The increasing demand for information disclosure in accounting reporting standards is drawing interest on how valuers and accountants can speak the same language when reporting asset values. Within the framework of financial reporting, International Valuation Standards focus towards compliance with the conventions adopted by the International Accounting Standards. This paper contributes to harmonising depreciation calculation by introducing short-cut formula approaches that may be incorporated into valuation practice and at the same time consistent with the language accountants understand. It presents formulas for calculating allowable annual depreciation (AAD), accumulated depreciation (ACD), and depreciated asset values (DAV) in the accelerated methods. The formulas overcome the use of cash flow tables, simplify both the teaching and practice of the cost method of valuation and can be applied to any depreciable assets.