Depreciation Calculator

In 2026, a CFO of a regional freight carrier in Memphis files her 10-Q with the SEC. The tractor fleet is depreciated under the units-of-production method based on miles driven; the terminal buildings are on 39-year straight-line MACRS. Both are required to be disclosed under ASC 360 (FASB) and shown on the cash-flow statement's D&A line. The math behind depreciation took 150 years to standardize.

The first systematic depreciation accounting was developed by US and British railroads in the 1870s. Locomotives, rolling stock and track were the first assets large enough that lump-sum write-off was impractical. The 1882 Atchison, Topeka & Santa Fe Railway financial report was one of the first to show straight-line depreciation on locomotives. The Interstate Commerce Commission (ICC) made it mandatory for regulated railroads in 1907.

Henry Hatfield's 1909 textbook Modern Accounting introduced declining- balance depreciation as "a more realistic representation of asset value decay." Hatfield was the first dean of Berkeley's business school. His treatment of depreciation as "accumulated estimated loss in service value" remains the modern definition. The Federal Reserve Bank of New York studies (1916, 1920) extended this to industrial assets.

US tax depreciation was codified in the 1913 Revenue Act (Section 117). Before 1942, taxpayers chose method and life. The IRS's Bulletin F (1942) introduced standard useful lives by asset class. The 1954 Internal Revenue Code (now IRC § 167) allowed taxpayers to use straight-line, declining balance, sum-of-years-digits, or any other consistent method. This is the regime our calculator implements.

The 1981 Economic Recovery Tax Act introduced the Accelerated Cost Recovery System (ACRS) to stimulate capital investment after stagflation. ACRS abandoned the traditional useful-life concept and assigned arbitrary 3/5/10/15-year classes. The 1986 Tax Reform Act replaced ACRS with MACRS (Modified ACRS) and added 7-year, 20-year, 27.5-year and 39-year classes. MACRS is the current US tax regime under IRC § 168.

US GAAP under FASB's ASC 360 separates book depreciation from tax depreciation. Book depreciation reflects the economic exhaustion of the asset (typically straight- line); tax depreciation reflects political choice (MACRS, often accelerated). The difference creates deferred tax liabilities — every public company's 10-K shows a substantial DTL line item resulting from this gap. Per ASC 740 (income taxes), the DTL is measured at the enacted tax rate.

IFRS under IAS 16 takes a slightly different approach: separate components of complex assets must be depreciated separately. A building's roof has a different life than its shell, and IFRS requires separate depreciation of each. The IASB also allows fair-value revaluation under IAS 16 paragraph 31 — US GAAP does not. This is one of the largest remaining GAAP-IFRS gaps, slated for harmonization under the IFRS-FASB convergence project that has been pending since 2007.