Ask your accountant.
What method do shops predominantly use to calculate depreciation for their machinery?
Sort of random, but I am looking into maintenance position, and it would be nice to know if there are any industry norms regarding this task.
I'm assuming it would be something like UOP (unit-of-production), or some hourly/daily work-hour relationship. Nevertheless, any other information one might find relevant?
1. Is it for financial statement purposes?
If so, is it for accrual accounting financial statements for external reporting, or managerial financial statements for managing the company and it operations? If the latter, are they complied on an accrual basis or a cash basis?
2. Is it for tax accounting?
If so, is it for the Federal tax return or a State tax return?
Does the machinery qualify as Section 179 property?
Does the State tax return use information directly taken from the Federal return or are there separate calculations based on different definitions of "property" and how that "property" can be treated.
Or are you referring to tax accounting [ad valorum taxation] for filing personal property tax forms with a local taxing jurisdictions like a town or country?
3. When you say "their machinery", do you mean the machine itself; the electronics that controls it; the software that runs it; the tools that are used by it; or the installations costs; or some combination of these?
4. Do you mean by "depreciation", estimates of lives for the various mechanical and electronic and software portions that comprises an operating machine, and the engineering estimates of the life-span of those portions [short-lived; mid-term-lived; and long-lived], and the various methods of calculation the cost of replacements so for budgeting purposes there can be a cost item in the line items that make up the hour cost of operation the machinery known as: "reserves for replacements"?
5. Is the machinery and concomitant operating systems, owned property or leased property?
6. If owned property, then were there loans taken to acquire the property, then what type of loans and how is the principal balanced amortized, and how was that accounted for, both short-term and long-term?
7. If leased property, how was the lease structured?
Lordly, aren't accountants nauseating!
[And I am just getting warmed up!]
Word. Thank you for "dropping the knowledge." I have big respect for Socratic method.
Nevertheless, I will be reading up on this stuff for the future.
Thanks again for the direction.