What is the essence of balanced depreciation?

The essence of balanced depreciation lies in its approach to determining the reduction of an asset's value over time based on a constant percentage. This method is advantageous because it reflects how many assets typically lose value more rapidly during the earlier years of their life cycle. By applying a constant percentage to the asset's remaining value each period, this approach provides a more accurate representation of the asset’s decreasing worth, which aligns well with the reality of many asset utilizations.

Using this method allows for a more nuanced reflection of value loss, compared to alternatives that may apply a uniform dollar amount reduction or involve fixed assessments over set periods. Consequently, balanced depreciation can provide a clearer financial picture for an organization, making it particularly relevant in the context of maintaining and optimizing asset management in residential care and assisted living facilities.