SLM of Depreciation vs. WDV Method of Depreciation — What's the Difference?
By Tayyaba Rehman — Published on January 17, 2024
SLM (Straight Line Method) of Depreciation charges a fixed depreciation amount each year, while WDV (Written Down Value) Method charges depreciation at a fixed percentage, reducing the value each year.
Difference Between SLM of Depreciation and WDV Method of Depreciation
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Key Differences
SLM of Depreciation involves dividing the cost of an asset, minus its salvage value, by its useful life to determine a constant annual depreciation. WDV Method of Depreciation, on the other hand, depreciates the asset at a constant rate, resulting in a decreasing depreciation amount each year.
In SLM, the depreciation expense is the same each year, making it simple and easy to calculate. In contrast, WDV Method results in higher depreciation charges in the earlier years and lower in later years.
SLM is suitable for assets with a consistent rate of use over their lifespan. WDV Method is preferred for assets that lose value more quickly in the initial years.
The book value of an asset under SLM reaches its salvage value at the end of its useful life. With WDV Method, the book value decreases exponentially and may not reach zero.
SLM is straightforward and predictable for budgeting purposes, while WDV Method offers tax advantages in the early years of an asset's life due to higher depreciation expenses.
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Comparison Chart
Depreciation Calculation
Fixed amount each year
Fixed percentage on reducing value
Expense Pattern
Equal annual expense
Higher in early years, decreases over time
Suitability
Assets with consistent use
Assets losing value quickly initially
Book Value at End of Life
Reaches salvage value
May not reach zero
Financial Planning
Predictable for budgeting
Offers early tax advantages
Compare with Definitions
SLM of Depreciation
Simple and easy to calculate.
We chose SLM for our furniture depreciation due to its simplicity.
WDV Method of Depreciation
Higher depreciation in the early years.
WDV allowed us to claim higher depreciation on machinery in its initial years.
SLM of Depreciation
Suitable for assets with consistent usage.
SLM was ideal for our office building, which has a steady utilization rate.
WDV Method of Depreciation
Offers early tax advantages.
We opted for WDV for tax benefits in the early years of asset acquisition.
SLM of Depreciation
Divides asset cost by its useful life.
With SLM, the printer's depreciation was calculated based on a five-year lifespan.
WDV Method of Depreciation
Preferred for assets losing value quickly.
WDV was suitable for our tech equipment, which becomes outdated rapidly.
SLM of Depreciation
Predictable for budgeting purposes.
The finance team prefers SLM for its predictability in financial planning.
WDV Method of Depreciation
Depreciates asset at a constant percentage.
The company used WDV for its computers, depreciating them at 20% annually.
SLM of Depreciation
Charges a fixed depreciation amount annually.
The company used SLM to evenly spread the cost of equipment over its lifespan.
WDV Method of Depreciation
Results in decreasing depreciation amounts.
The vehicle's depreciation expense reduced each year with the WDV method.
Common Curiosities
How does SLM affect budgeting?
It provides predictable annual expenses for easier budgeting.
What is SLM of Depreciation?
It's a method where depreciation is charged at a fixed amount each year.
What types of assets suit SLM?
Assets with a consistent rate of use over time.
What happens to the book value at the end of an asset's life in SLM?
It reaches the salvage value.
How does WDV impact early years' expenses?
It results in higher depreciation expenses in the early years.
What is the WDV Method of Depreciation?
It's a method where depreciation is charged at a fixed percentage on the reducing value.
Is SLM easy to calculate?
Yes, it's simple and straightforward.
Does WDV always bring book value to zero?
No, the book value may not reach zero by the end of the asset's life.
Is WDV suitable for all assets?
It's best for assets that lose value quickly in the initial years.
What is the tax impact of WDV?
It can offer tax advantages in the early years due to higher depreciation.
Is WDV more complex than SLM?
Yes, WDV is more complex due to its reducing balance approach.
Can SLM be used for tax purposes?
Yes, but it may not provide the early tax benefits that WDV does.
Which method gives higher depreciation initially?
WDV provides higher depreciation in the initial years.
Which method is better for rapidly depreciating assets?
WDV is generally better for assets that depreciate quickly.
Can SLM be changed to WDV?
Generally, a consistent depreciation method should be used throughout an asset's life.
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Written by
Tayyaba RehmanTayyaba Rehman is a distinguished writer, currently serving as a primary contributor to askdifference.com. As a researcher in semantics and etymology, Tayyaba's passion for the complexity of languages and their distinctions has found a perfect home on the platform. Tayyaba delves into the intricacies of language, distinguishing between commonly confused words and phrases, thereby providing clarity for readers worldwide.
