Professional accounting bodies in the United Kingdom, the United States and Canada are requiring disclosure of current cost of capital equipment and related depreciation. In this paper the ability of a normative programming model of the firm to produce depreciation allocations in accordance with economic depreciation is examined, and the model's depreciation allocations are compared with current professional pronouncements. It is found that if the firm can costlessly adjust capacity period‐by‐period, current cost depreciation is on strong theoretical grounds. Otherwise depreciation should be based on value