DEFINITION of 'Annuity Method Of Depreciation'
A method of depreciation centered around cost recovery and a constant rate of return upon any asset that is being depreciated. This method requires the determination of the internal rate of return (IRR) on the cash inflows and outflows of the asset. The IRR is then multiplied by the initial book value of the asset, and the result is subtracted from the cash flow for the period in order to find the actual amount of depreciation that can be taken.
BREAKING DOWN 'Annuity Method Of Depreciation'
The annuity method of depreciation is also commonly referred to as the compound interest method of depreciation. If the cash flow of the asset being depreciated is constant over the life of the asset, then this method is called the annuity method. However, the annuity method of depreciation is not endorsed by GAAP principles.

Accelerated Depreciation
Any method of depreciation used for accounting or income tax ... 
Appraisal Method Of Depreciation
A form of depreciation calculation that is based upon appraisal ... 
Depreciation
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Accumulated Depreciation
The cumulative depreciation of an asset up to a single point ... 
Sinking Fund Method
A technique for depreciating an asset in bookkeeping records ... 
SumOfTheYears' Digits
An accelerated method for calculating an asset's depreciation. ...

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What is the relationship between accumulated depreciation and depreciation expense?
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What are the different ways to calculate depreciation for tangible assets?
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How is salvage value used in depreciation calculations?
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Is depreciation only used for tangible assets?
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What is the best method of calculating depreciation for tax reporting purposes?
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