What is Straight-Line Depreciation?
Straight-line depreciation is the simplest and most common depreciation method, allocating an equal amount of an asset’s depreciable cost (cost minus salvage value) to each year of its useful life.
How It Works
- Formula: annual depreciation = (cost – salvage value) / useful life.
- Same expense recognized each year over the asset’s useful life.
- Easy to apply, predictable expense pattern.
- Best when economic benefits are consumed evenly.
Saudi Context
Most Saudi SMEs and listed companies use straight-line depreciation for buildings, furniture, vehicles, and IT equipment because it aligns with IFRS preference for the method that best reflects the pattern of economic benefit consumption, and ZATCA accepts straight-line for tax/zakat purposes unless an accelerated regime applies.
Example
A Saudi business buys a delivery van for SAR 150,000 with a SAR 20,000 salvage value over 5 years. Annual depreciation = (150,000 – 20,000) / 5 = SAR 26,000. Year-end entry: Dr Depreciation Expense 26,000, Cr Accumulated Depreciation 26,000.