Depreciation rates for machinery and equipment increase: Study
Bill RoebuckIndustry Machinery and Equipment Maintenance
Ottawa – Today (Jan. 26, 2015), Statistics Canada released a new study in The Canadian Productivity Review called An Update on Depreciation Rates for the Canadian Productivity Accounts.
This study generates updated estimates of depreciation rates to be used in the Canadian Productivity Accounts for the calculation of capital stock and the user cost of capital. Estimates are derived from depreciation profiles for a diverse set of assets, based on patterns of resale prices and retirement ages from the Capital and Repair Expenditures Survey.
The earlier estimates that were derived for the period from 1985 to 2001 are compared with those for the latest period, 2002 to 2010. On average, the estimates of depreciation rates for buildings are not found to be significantly different. The aggregate average estimates for machinery and equipment, though, have increased. This increase is mainly a result of the compositional effect of those categories with higher depreciation rates (such as computers and communication equipment) becoming increasingly important.
The estimates of the rates for individual assets for the two periods are rarely different from one another. The data from the two periods are grouped together, yielding estimates to be used in computing the capital stock. Overall, the growth rate of capital stock using the new depreciation rates is similar to that using the previous depreciation rates as reported by Statistics Canada (2007).
The estimates of realized length of life are compared with those of predicted length of life based on surveys and found to be broadly similar.
The research paper An Update on Depreciation Rates for the Canadian Productivity Accounts, part of The Canadian Productivity Review (Catalogue number15-206-X), is now available from the Browse by key resource module under Publications at statcan.gc.ca.