Return on Software: Maximizing the Return on Your Software Investment

Units-of-Production Depreciation

Units-of-production depreciation isn't allowed under the current U.S. tax code, but it is worth discussing. It might be allowed someday, and it is a different way of looking at the same basic issue.

All the depreciation methods described previously are based entirely on calendar time and ignore how the asset is actually used during that time. Even if the asset, such as a computer, were stored unopened in its factory shipping crate, it would be depreciated the same way as if it were used in a way that literally destroyed it in as little as two years. In contrast, units-of-production depreciation assumes that depreciation happens based on how much work the asset performs, regardless of its calendar age. The per-unit-of-production ...