This is not accounting advice. Depreciation method selection depends on your accounting policies and your auditor’s guidance.
Operationally, though, method selection becomes a problem when:
- it is inconsistent across assets
- assumptions are undocumented
- depreciation is calculated “manually” without a stable schedule
If you want the product overview first:
Straight line (when teams pick it)
Straight line is common because it is predictable:
- same depreciation amount each period (based on policy inputs)
- easy to review and explain
Operational benefit:
- reduces surprises at month-end
- simplifies forecasting and planning
Declining balance (what it optimizes for)
Declining balance is often used when:
- assets lose value faster early in their life
- the policy expects higher expense recognition early
Operational risk:
- harder for teams to sanity-check without a clear schedule
- errors can go unnoticed if the workflow is not reviewable
The practical rule: pick one default, then use exceptions intentionally
Most teams should:
- pick a default method by category
- allow exceptions, but require explicit reasons
- keep method changes auditable (no silent edits)
If governance matters, pair this with:
What matters more than the method: the workflow
Even perfect policy choices fail if month-end is a one-person spreadsheet.
Your fixed asset workflow should support:
- categories with defaults (repeatable setup)
- a visible depreciation schedule (reviewable outputs)
- a monthly run workflow (preview → create → post)
Start here: