A system of depreciation that entails higher depreciation expenses in the early years of the life of an asset, for accounting or income tax purposes. It involves depreciating an asset (physical in nature) on a rapidly increasing rate, allowing for a higher proportion from the entity’s taxes. Under this system, an entity’s assets are grouped in various classes, with each being assigned a specific time period over which it would be set to depreciate, rather than over a period defined by their useful lives. This is in contrast with the straight-line depreciation method, whereby the depreciation cost is spread evenly over an asset’s expected useful life.
For example, it may entail the deployment of a 150% or 200% declining balance system, taking into consideration the expected useful life assigned to each and every asset class.
This system is also referred to as accelerated cost recovery system (ACRS).
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