Straight-line depreciation
Straight-line depreciation spreads an asset's depreciable cost equally over its useful life. The annual charge is (cost minus residual value) ÷ useful life in years, producing a constant expense each period.
FrameworkDepreciation
What it is
See it move
A delivery lorry costs €50,000 with an estimated residual value of €5,000 and a five-year useful life. Straight-line depreciation divides the €45,000 depreciable amount evenly: €9,000 charged in year one, €9,000 in year two, and so on through year five, an identical layer stacking up to the full €45,000, leaving the lorry carried at its €5,000 residual.
The formula
Variables
- Cost (purchase price plus directly attributable acquisition costs) (€)
- Residual value (estimated salvage value at end of useful life) (€)
- Useful life (years)
Produces an identical charge each period; the most widely used depreciation method.
If you trained under a national GAAP
DE · HGBWhere national-GAAP intuition diverges from the international standard
HGB (German)
The straight-line method itself is common ground: HGB, like IFRS, spreads the depreciable amount evenly across the useful life. The divergence lies in how the inputs are chosen. Because German commercial accounts are closely tied to the tax accounts, the useful lives and rates applied in the statutory financial statements are frequently taken from the tax authority's published depreciation tables rather than from an independent estimate of economic life. HGB also generally depreciates an item of plant as a single unit rather than breaking it into separately depreciated parts.
IFRS
IAS 16 requires the useful life and residual value to reflect management's own assessment of how the asset will be consumed, independent of any tax schedule, and both must be reviewed at least each year-end. IFRS additionally applies a component approach: where significant parts of an asset have different useful lives, each part is depreciated separately, even if all of them happen to use the straight-line method. So two firms can both depreciate on a straight-line basis yet report different annual charges because IFRS componentises the asset and sets lives on economic rather than tax grounds.
Edlintics’ own explanatory summary — not official IFRS Foundation or national standard-setter guidance.
Check yourself
A company purchases a machine for €50,000, estimates a residual value of €5,000 and a useful life of five years. Using the straight-line method, what is the carrying amount of the machine at the end of year four?