ABSTRACT
Depreciation is an artificial expense that spreads the depreciable value of the equipment over the depreciation period, usually several years. The depreciation period is the number of years the equipment is owned. In accelerated depreciation methods, such as the double-declining-balance method, the item of equipment may be fully depreciated during the first few years of ownership, and no further depreciation can be taken during the remaining years the contractor owns the item. Contractors may use one method of depreciation for tax accounting purposes and another for determining rates to charge projects for equipment use. Construction equipment loses value with age. This loss in value is called depreciation. The value of the equipment at the time of purchase is the purchase price, and the value at the time of disposal or retirement is the salvage value. The straight-line method of depreciation accounting depreciates the equipment value equally in each of the years the equipment is owned.
