Unit of Production Method

AAA

DEFINITION of 'Unit of Production Method'

A depreciation procedure used for property that is not in continuous use. The unit of production method is useful when the property's value is more closely related to the number of units it produces than the number of years it is in use. It results in greater deductions being taken for depreciation in years when the asset is heavily used.

INVESTOPEDIA EXPLAINS 'Unit of Production Method'

In general, the IRS requires businesses to depreciate property using the Modified Accelerated Cost Recovery System (MACRS), but it allows businesses to exclude property from this method if it can be accurately depreciated by another method. The depreciation method must be chosen at the time the property is placed in service.

RELATED TERMS
  1. Economic Depreciation

    A measure of the decrease in value of an asset over a specific ...
  2. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax ...
  3. Salvage Value

    The estimated value that an asset will realize upon its sale ...
  4. Depreciation

    1. A method of allocating the cost of a tangible asset over its ...
  5. Straight Line Basis

    A method of computing amortization (depreciation) by dividing ...
  6. Accumulated Depreciation

    The cumulative depreciation of an asset up to a single point ...
Related Articles
  1. Active Trading

    An Introduction To Depreciation

  2. Forex Education

    Depreciation: Straight-Line Vs. Double-Declining ...

  3. Taxes

    Capital Gains Tax 101

  4. Taxes

    Avoiding IRS Penalties On Your IRA Assets

Hot Definitions
  1. Capitulation

    When investors give up any previous gains in stock price by selling equities in an effort to get out of the market and into ...
  2. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  3. Conduit Issuer

    An organization, usually a government agency, that issues municipal securities to raise capital for revenue-generating projects ...
  4. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  5. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  6. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
Trading Center