Unit of Production Method

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.

BREAKING DOWN '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.

Trading Center