Sometimes, the four traditional depreciation methods may not be suitable for certain assets that have unique characteristics or for industries that require the use of special depreciation methods. In these cases, the group and composite methods can be used.
The group method involves depreciating a group of assets that are similar in nature using one rate. This method is often used when the assets are fairly homogeneous and have approximately the same useful lives.
The composite method is used when the assets being depreciated are not similar and have different useful lives. This method involves developing a rate based on averages by computing the annual depreciation for each asset, determining the total annual depreciation, and dividing it by the total cost of the assets.
