Alternative Depreciation System - ADS


DEFINITION of 'Alternative Depreciation System - ADS'

A depreciation schedule with a straight-line recovery period that generally mirrors the class life of the asset's depreciation. Taxpayers who elect to use the alternative depreciation system feel that the alternative schedule will allow for a better match of depreciation deductions against income than the regular recovery period. Once they have switched from an alternative such as the modified acceleration cost replacement system (MACRS), the taxpayer can not switch back.

BREAKING DOWN 'Alternative Depreciation System - ADS'

Taxpayers who choose the ADS schedule must use this schedule for all property of the same class that was placed in service during the taxable year. However, taxpayers may elect the ADS schedule for real estate on a property-by-property basis. The alternative depreciation system recovery schedule is listed in IRS Publication 946.

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  1. Can working capital be depreciated?

    Working capital as current assets cannot be depreciated the way long-term, fixed assets are. In accounting, depreciation ... Read Full Answer >>
  2. Do working capital funds expire?

    While working capital funds do not expire, the working capital figure does change over time. This is because it is calculated ... Read Full Answer >>
  3. How much working capital does a small business need?

    The amount of working capital a small business needs to run smoothly depends largely on the type of business, its operating ... Read Full Answer >>
  4. What does high working capital say about a company's financial prospects?

    If a company has high working capital, it has more than enough liquid funds to meet its short-term obligations. Working capital, ... Read Full Answer >>
  5. How can working capital affect a company's finances?

    Working capital, or total current assets minus total current liabilities, can affect a company's longer-term investment effectiveness ... Read Full Answer >>
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