Memorandum
To: Richard Johnson, President
From: Robert Kinkaid, Financial Vice President
Subject: Appraise for the proposals
Date: October 4. 2015
This memo writes for appraising president’s proposals.

The Depreciation Method:
It is hard to eliminate deferred tax liability through changing the depreciation method from tonnage-of-production method to straight line depreciation method. At the first, there is a comparison different depreciation method. Unit-of-production method is a depreciation procedure used for a property which is not in continuous use. The unit of production method is useful when the property's value is more closely related to the number of units it produces than the number of years it is in use. It results in greater deductions being taken for depreciation in years when the asset is heavily used. The second depreciation method is diminishing balance method; this method is applied when the assets revenue decreases over its useful life. The depreciation is high in the early years of the useful life of the asset. The third one is straight line method; this method is applied when the assets generate revenue that is equal or very close to equal over its useful life.
Tonnage-of-production method is a unit-of-production method that matches depreciation expense with production volume and therefore revenues. The benefits of this method is to generate more depreciation expense during good times and less when sales is also less, mitigating the cyclical effect of the steel industry where Canada Steel operates in. Thus, this also leads to more stable earnings. In addition, the operating activity of the company is casting metals. Therefore the wear and tear of production facilities are more relevant in cost allocation than technology obsolescence in the technology business.
Furthermore, a switch to straight line depreciation method may not