Scandinavian Working Papers in Business Administration

SSE Working Paper Series in Business Administration,
Stockholm School of Economics

No 2017:1: A Note on the Linear and Annuity Class of Depreciation Methods

L. Peter Jennergren ()
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L. Peter Jennergren: Dept. of Accounting, Postal: Stockholm School of Economics, P.O. Box 6501, SE-113 83 Stockholm, Sweden

Abstract: The following four elementary depreciation methods are often mentioned together in the literature: Nominal linear, real linear, nominal annuity, and real annuity. All four are shown to be special cases of one generic formula. For that reason, they are referred to collectively as the linear and annuity class of depreciation methods. The four members of this class are then ranked (to the extent possible) by their remaining values. Such a ranking indicates the relative depreciation rates of the class members.

Keywords: Depreciation; nominal; real; linear; annuity; remaining value; capital service cost; depreciation rate

16 pages, February 1, 2017

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