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RD
RD, Certified Public Accountant (CPA)
Category: Finance
Satisfied Customers: 8784
Experience:  MBA, CPA
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1. What is the most common method used to deplete or ...

Customer Question

1. What is the most common method used to deplete or depreciate these assets in accounting?
2. What is an SFA? And what is SFAS no 115? Where do I find that?
Submitted: 8 years ago.
Category: Finance
Expert:  RD replied 8 years ago.

What "assets" are referred to in the Question?

Expert:  RD replied 8 years ago.

SFAS is Statement on Financial Accounting Standards. You can get these from www.fasb.org

Link to SFAS 115

http://www.fasb.org/pdf/fas115.pdf

 

Customer: replied 8 years ago.
Depletion is the term used for depreciation of mineral property used to extract natural resources. While depreciation is a provision for gradual wear and tear of an asset used in business, depletion is provision for the exhaustion of natural resources.
Different methods are used to calculate depreciation as compared to methods used to calculate depletion.
Expert:  RD replied 8 years ago.

Yes that is correct.

For depreciation

For financial reporting per GAAP - the most common method used is straight line method-which is simple and easy to use. Other methods used could be double declining balance method or sum of the years digit method

for tax- MACRS(modified accelerated cost recovery system) is widely used.

For depletion:

For financial reporting per GAAP - the most common method used is units of production method.

 

Expert:  RD replied 8 years ago.
DO you need the formulaes to calculate under each of these methods?
Expert:  RD replied 8 years ago.

In any case, I will attach a link to the worksheet which will provide you some information on the depreciation calculation under each of these methods-

Link