Economics

The straight-line method of depreciation of assets is the most commonly used method mostly because it is not overly complicated. This method considers the salvage value of an asset and estimates the useful life of it and spreads over the assets benefit across that timeline. The idea is the company is utilizing the assets equally in that time frame. At the end of its useful life, it would be sold or donated. The major criticism about this kind of depreciation is that, this model assumes that assets provide the same amount of benefit across time. Usually they are efficient in the first few years but later on, they will slump, causing operational delays.

Another depreciation method is total units-of-activity method (Manko, 2009). It computes depreciation based on units produced. However, this does not account for idle time. When the equipment is not being used, it still depreciates in value because it is a machine and it dies with old age or it becomes irrelevant as new technologies get introduced.

Other methods companies use are accelerated depreciation techniques. Amongst the most common in this area is the double-declining method. This method allows the company to depreciate its assets (incur more depreciation expenses) in the early years of the assets life. This allows company to get more tax savings in the first few years of investment because depreciation do not actually involve cash outlay (Manko, 2009).

Related Party Transactions
These are transactions between two parties who are joined before they enter into the contract by a special relationship (parent-subsidiary, sister companies, major shareholder  corpoaration, etc.) (Investopedia, 2010). Related party disclosures are required by American laws because these transactions may create potential conflicts of interest between the parties (Investopedia, 2010).

Essentially, what must be established is that the parties dealt with each other in an arms-length transaction or, that they have dealt within what is the standard business practicescostsestimated within the industry. No one party should be greatly benefitted by the transaction.