Buying assets is easy, but managing their depreciation can be complex. As assets age, their value decreases, and businesses must account for this decline to reflect their financial position.
IT assets—such as laptops, computers, servers, and software—are no exception.
Understanding IT asset depreciation is important for businesses to make informed decisions about their IT investments and maintain accurate financial records (e.g., calculating tax on depreciable assets).
In this blog, we define an asset (in terms of IT), discuss its depreciation, and discuss popular methods for calculating depreciation for IT teams.
Assets are items or commodities with economic value. In IT terms, they can be hardware or software.
IT assets depreciate over time due to wear and tear. This factor is influenced by the cost of an investment, its useful life, salvage value, legal regulations, and depreciation methods.
Different methods of calculating depreciation are straight line, declining balance, double declining balance, units of production, and the sum of years digits. Each method holds distinct significance when depreciation is fast or when assets depreciate evenly over the years.