Analysis of depreciation method selection by information criterion

Abstract

A purpose of this research is to investigate factors of depreciation method selection. For this purpose, a questionnaire was carried out to the listing 1, 2I2 companies which belong 1o the manufacturing industry.

7 hypotheses were set up prior to a questionnaire. The examination of these hypotheses was carried out from the result of a questionnaire. A contingency table which explains a deprecation method selection was requested by using Akaike Information Criterion (AlC).

As a result of analysis, the factors were profitability, extent of debt loan and importance of property. Prescription power of profitability is most strung, extent of debt loan follows. Prescription power of the importance of properly is weak compared with former 2 factors. Also, when economic useful life is long, companies lend to adopt straight line method.

The model which include profitability and extent of debt loan as explanatory variables, furthermore, importance of property is added to in the case that profitability is low and extent of debt is high, was chosen as the model that explains a selection situation of a depreciation method besl, from analysis that used AIC.