SLM vs WDV method of Depreciation

Question

Accepted Answer

SLM method evenly distributes depreciation over the useful life of an asset, while WDV method accelerates depreciation in the early years.

SLM method charges a fixed amount of depreciation each year, calculated as (Cost - Residual Value) / Useful Life
WDV method charges higher depreciation in the early years and lower depreciation in the later years, calculated as (Book Value - Residual Value) * Depreciation Rate
SLM is simpler to calculate and provides a more even expense recognition over time, while WDV reflects the actual wear and tear of an asset more accurately
Example: A machine costing $10,000 with a useful life of 5 years and a residual value of $2,000. SLM depreciation would be $1,600 per year, while WDV depreciation could be $3,200 in the first year and decreasing in subsequent years

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