Question

Explain how to determine depreciation basis for a project?

Answer 1

Depreciation basis is calculated / determined as difference between acquisition cost of asset and estimated salvage value of asset at end of its estimated useful life.

Depreciation basis (for project) = Acquisition cost of asset (project) - Salvage value of asset (project) after end of its life.

The determination of correct depreciation basis is very important in project because depreciation is calculated on depreciation basis only. Acquisition cost of project (in calculation of depreciation basis) include all the costs like installation costs, transportation costs etc., i.e., to bring the asset to a business place for application.