An introductory overview of the concept of depreciation as it affects the income statement is provided by this 24-minute audio lecture. A 10-slide presentation is simultaneously used to enhance the lecture. The depreciation methods covered include: straight line, straight line with the half year convention, double-declining balance, double-declining balance with the half-year convention, Accelerated Cost Recover System (ACRS), and Modified Accelerated Cost Recover System (MACRS). Reporting depreciation for financial purposes versus tax purposes is discussed. Finally, fifteen exercises with solutions are included for users to work on their own time.
Type of Material:
Audio lecture with Power Point Slide enhancements
Internet browser, Real Player plug-in, Adobe Acrobat Reader
Identify Major Learning Goals:
To provide and introduction to depreciation from an income statement standpoint and help students understand how to use five different methods for determining depreciation expense.
Target Student Population:
College level Introductory Financial Accounting course or review in a basic Finance course.
Prerequisite Knowledge or Skills:
Understanding of the concept of ?depreciable base?.
Evaluation and Observation
The lecture provides an over simplification of the concept of depreciation and, as a result is incomplete and inaccurate. First of all, the term ?depreciable base? is used without providing any sort of explanation. In addition, the cost components that comprise the depreciable base have been ignored. Next, the concept of salvage value has been completely excluded. As a result, the explanation of the double-declining balance method is inaccurate. Finally, depreciation affects a company?s balance sheet as well as the income statement. To ignore the balance sheet implications presents an incomplete picture of the concept. The definition of depreciation is based on depreciating the market value of an asset. Depreciation is a method of cost recovery and would exist even when an asset increases in value. The point that depreciation is a non-cash expense is well taken, but it should be pointed out that the cash outflow occurs when the asset is purchased. Otherwise, it looks like a free deduction.
Also, the statement that tax benefits are the primary motivation for depreciation deductions seems incorrect. The motive is simply to recover the investment's cost. The distinction between business assets and production of income assets is not well done. This distinction is useful only in an individual income tax situation.
Potential Effectiveness as a Teaching Tool
The module progresses logically through the material, building on prior concepts and demonstrating relationships between concepts. End of module exercises provide an opportunity for independent practice.
The lack of accuracy of content makes the effectiveness of the teaching tool suspect. Instructors would need to make sure students understood and realized that the presentation is an over simplification with many key concepts important to the understanding of depreciation omitted.
Ease of Use for Both Students and Faculty
An introduction informs the user as to what software and supplemental materials will be required. Links to Real Player and Adobe Acrobat reader are provided. Tips on using Real Player include an excellent graphic and appear to be well done. The pace at which the audio is delivered is effective.
Upon starting the audio, the first sentence spoken is hard to hear. As a result the lecture begins rather abruptly, and it is difficult to tell whether the lecture is starting at the beginning.
The MACRS table could not be printed with either Internet Explorer or Netscape Communicator whether one followed or did not follow the instructions provided.
The vocal quality of the audio lecture is somewhat monotonous indicating that a script is being read. Voice inflection needs to vary more dramatically to relay enthusiasm for the material.
The number of video slides included and content contained within some of them is rather scant.
Skipping forward or backward through the audio may not be possible depending upon the version of Real Player being used. As a result, if users miss something all they can do is start the lecture over from the beginning.