Different methods for depreciating assets

There are different types of depreciation methods used. IAS 16 for an example mentions the following methods: 

  •  Straight-line – the simplest method for depreciating an asset since each period the charge is in the same amount;
  • Diminishing balance – it’s expected that an asset is more beneficial economically in the beginning of usage and gradually loses its productivity and as such the depreciation charge kicks off higher and gradually decreases;
  • Units of production – for an example if an asset can only produce say 100,000 items in its lifetime, this 100,000 is then measured as the useful life and the charge is calculated based on the units produced during a reporting period (a month for an example).

It’s important to mention that the method should be chosen based on how closely it reflects the expected pattern of consumption of future benefits arising from the use of the asset. Note here as well that for various types of assets different methods ought to be applied if they’re more suitable.

I do suggest you also consult with your own accounting framework (unless it is actually IFRS). There are frameworks that only give one or two of the above as options for depreciation or they may have their own guidelines. It may be that they forbid usage of any of the above for an example.