Which method of depreciation is suitable for assets that can be reliably measured for actual use?

The units-of-use method, also known as the units of production method, is particularly suitable for assets that can be reliably measured based on actual usage rather than the passage of time. This method allocates depreciation based on the actual activity or production levels of the asset, making it directly proportional to the amount the asset is used.

For example, if an asset is utilized more in one year than in another, the depreciation expense will reflect that higher usage, allowing for a more accurate representation of the asset's wear and tear. This is especially useful for machinery or equipment where usage can vary significantly from one period to another. By linking depreciation directly to usage, this method provides a more precise outcome for both financial reporting and asset management, giving businesses better insight into the true operational costs associated with their assets.

Other methods, such as the straight-line method and declining balance method, allocate depreciation based on a set schedule or formula, which may not accurately reflect the actual use or productivity of an asset over time. This can lead to discrepancies between recorded expenses and the asset's actual contribution to the operations. Therefore, the units-of-use method stands out as the most fitting choice for assets where usage can be quantified reliably.