Depreciation, Amortization, Depletion   Definition: The
allocation of the cost of an asset over its useful life.
Depreciation can be calculated using a variety of methods. The
most common method for financial reporting purposes is the
Straight-line method or the Unit-of-Production (output) method
(this is a variation of the straight-line method)  Sometimes
companies use one of the accelerated methods for financial
reporting purposes, but generally accelerated depreciation
methods are used for tax purposes only. At the current time, tax
law requires companies to use the Modified Accelerated Cost
Recovery System (MACRS). This method is not further discussed
here (tax law changes frequently). Two commonly used accelerated
depreciation methods are the declining balance method and the
sum-of-the-years-digits method. These methods are discussed
below. The important thing to remember is that depreciation
expense for tax purposes is frequently calculated using a
different method than for financial reporting purposes