When is the straight-line method of depreciation appropriate to use?

The straight-line method of depreciation is appropriate to use when depreciation remains consistent over each whole year of an asset’s useful life, leading to a uniform expense recognized annually. This method assumes that the asset will provide equal utility and revenue generation throughout its lifespan, making it simple and easy to apply.

This approach is particularly effective for assets whose economic benefits are realized evenly over time, such as buildings and office equipment. By spreading the cost evenly, businesses can better match the expense of using the asset with the revenue it generates.

In contrast, the other scenarios presented do not align with the straight-line method. Rapid value loss is better represented by accelerated depreciation methods, while fluctuating usage suggests a need for a method like units of production depreciation, which varies based on actual use. The straight-line method isn’t restricted to intangible assets; it can apply to both tangible and intangible, but is not solely limited to intangibles. Hence, uniform depreciation over the useful life makes the straight-line method the right choice for consistent annual expense recognition.