Depreciation Aspects in Accounting Essay Example | Topics and Well Written Essays - 500 words

Depreciation Aspects in Accounting - Essay Example et, the market value of the asset in the future, the rate at which the technology and the hardware becomes obsolete in the segment and in some cases the opportunity costs involved in purchasing the asset. The innovations in Information Technology segments and the accelerated release of upgrades in the computer segment play an important role in analyzing the value of the asset at a particular time period (Samuels et al, 2000). All these factors have to be considered in deciding the appropriate depreciation methodology for the computer server. The depreciation method followed has a great impact on the financial performance of the company. In other terms, the method applied and the values entered in the accounts have a significant effect on the three key financial statements, namely the balance sheet, income statement and the cash flows statement. The income statement includes the depreciation values incurred in the particular time period and will have a significant effect on the operating profit and the taxes levied. In case the depreciation values are lesser than what was actually incurred, it will give a wrong impression about the company’s performance and can lead to dire circumstances in the later stages. The fixed assets are represented in the balance sheet. The original cost, accumulated depreciation and the current book values are included so that a clear picture of the usability of the assets is presented. It is imperative to include the appropriate depreciation values so that the book values are close to the market values as possible. In this case, the replacement cost of the assets can be reasonable and will not have any extreme consequences in the performance if the assets are to be replaced. The depreciation values should also clearly indicate the amount of usage that they have been put into, so that the age and usefulness of the fixed assets are clearly depicted (Samuels et al, 2000). In the case of the new computer server, it has been estimated