I am researching a company for my class. I am supposed to identify the depreciation method in use.
How do I do this? I've searched through their annual report and they don't explicitly say.
You will probably have to call company HQ and ask to be put in touch with someone who can help you. I suspect that you will be told that the depreciation method depends upon the asset class and when the depreciated item was purchased. The rules are always changing. This excerpted article may be helpful:
http://goliath.ecnext.com/coms2/gi_0199-2310359/Technical-note-new-depreciation-rules.html
To identify the depreciation method in use by a company, there are a few different approaches you can take:
1. Review the annual report: Although you mentioned that the company's annual report doesn't explicitly state the depreciation method, it is possible that some companies do include this information. Look for any sections related to accounting policies, notes to the financial statements, or management's discussion and analysis, as these sections may provide insights into the specific depreciation method used.
2. Contact the company directly: As you mentioned, reaching out to the company's headquarters and requesting assistance is another option. Ask to speak with someone knowledgeable about accounting practices or financial reporting. They should be able to provide you with information about the depreciation method used by the company.
3. Analyze financial statements: If the company's annual report doesn't explicitly state the depreciation method, you can try to indirectly determine it by examining the financial statements. Pay attention to the values reported for property, plant, and equipment, and how they change from one period to another. If there are significant differences in values, it may indicate that a different depreciation method is being used, such as straight-line, declining balance, or units of production.
4. Research industry standards: If all else fails, you can research the typical depreciation methods used in the company's industry. Different industries often have commonly used depreciation methods based on the nature of their assets. This could provide you with some insights into the most likely method being used by the company you are researching.
Keep in mind that companies may choose to use different depreciation methods for different types of assets or for different periods. Additionally, depreciation methods can be influenced by accounting standards and regulations, so they may change over time.