The loss in value of an asset due to its use and/or the passage of time. The annual depreciation charge in accounts represents the amount of capital assets used up in the accounting period. It is charged in the cost accounts to ensure that the cost of capital equipment is reflected in the unit costs of the services provided using the equipment. There are various methods of calculating depreciation for the period, but the Treasury usually recommends the use of current cost asset valuation as the basis for the depreciation charge.
In accounting, the practice of deducting annually a specified amount or percentage from the value of equipment and machinery representative of the deterioration suffered by the equipment or machinery during the year. The deduction reduces the amount of profit reported but is not an actual out-of-pocket expense.
An asset used in a business on an ongoing basis retains a residual value. However, this value will reduce over the lifespan of the asset. This reduction in value is the depreciation and can be claimed as a deduction from business profits. Depreciation is claimed in accounts as Capital Allowances.
The opposite of appreciation, depreciation is the loss of value over time. Depreciation is most sudden in new cars, whose value drops sharply the moment they are driven off the showroom lot. That results in buyers being upside down in their loans, owing more than they are worth.
The annual deduction allowed to recover the cost of business property with a useful life of more than one year, such as machinery and equipment. The deduction does not apply to stock in trade, inventories, land, or personal assets and is reported as an expense that when subtracted from revenue, reduces the company's taxable income.
Assumption that as property ages, it loses value. Depreciation is used as a tax deduction on business or investment property. Different types of property are allowed different amounts of depreciation each year, called the depreciation schedule. If a property is depreciated to a value below it's actual market value, depreciation recapture tax will be due on the difference. Depreciation recapture tax is 25%.
Three basic types of depreciation are 1. normal from wear and tear of improvements; 2. functional obsolescence from non-typical function of various components of the home and site improvement inside of the property lines; and 3. economic obsolescence generated from a source outside of the property lines that adversely impact the value of the site and home improvements.
The decrease in the value of an asset allowed when computing property value for tax purposes. In appraising, a loss in the value of a property improvement from any cause. Depreciation is curable when it can be remedied by repair or an addition to the property, and incurable when there is no easy or economic remedy.
The difference between the cost or value of an asset and its residual value allocated over the series of accounting periods in the asset's useful life. The depreciation expense for a period is usually based on: (i) the likely useful economic life of the asset; (ii) the pattern of reduction in services during life; and (iii) its likely residual (or salvage) value on disposal at the end of its life.
(1) In financial markets, the decrease in the value of an asset due either to real factors (i.e. the worsening of its revenue prospects) or often simply to fear.(2) In accounting, the amount allocated each period to Amortize the book value of fixed assets.(3) On the foreign exchange markets, the decrease in the market value of a currency, where this decrease has taken place without any intervention by the country's monetary authorities. Compare with Devaluation. Français: Dépréciation Español: Depreciación, amortización
Return of investment through inclusion in cost of service (and rates) of a pro rata part of the cost of property, calculated to spread the total investment cost over a certain period of time or number of units that measure the useful life of the investment. Depreciation (in the Code of Federal Regulations) is to reimburse the company for "...the loss in service value not restored by current maintenance, incurred in connection with the consumption or prospective retirement of gas plant in the course of service from causes which are known to be in current operation and against which the utility is not protected by insurance. Among the causes to be given consideration are wear and tear, decay, action of the elements, inadequacy, obsolescence, changes in the art, changes in demand and requirements of public authorities, and, in the case of a natural gas company, the exhaustion of natural resources."
Amounts charged to the profit and loss account to reflect the wearing out of a fixed asse t over its useful life. For example, if a company buys a car for #10,000 with an expected useful life of four years, it will charge the #10,000 cost to profit and loss account over a four year period. The simplest way to do this is to charge #2,500 expense per year (straight line depreciation). The purpose of depreciation is to comply with the accruals concept. Since the benefit of the car is received over a four year period, the cost of acquiring the car is charged against profits over a four year period.
A deduction for a portion of the cost of a fixed asset presented as an expense in the income statement (profit and loss statement) for the current accounting period, such as for the current year. It allows the cost of the asset to be written off over its useful life.
A measure of the wearing out, consumption or other reduction in the useful economic life of a fixed asset, whether arising from use, effluxion of time or obsolescence through technological or market changes (FRS 11 and FRS 15). Depreciation should be allocated so as to charge a fair proportion of the total cost (or valuation) of the asset to each accounting period expected to benefit from its use.
The systematic allocation of the cost of an asset from the balance sheet to Depreciation Expense on the income statement over the useful life of the asset. (The depreciation journal entry includes a debit to Depreciation Expense and a credit to Accumulated Depreciation, a contra asset account). The purpose is to allocate the cost to expense in order to comply with the matching principle. It is not intended to be a valuation process. In other words, the amount allocated to expense is not indicative of the economic value being consumed. Similarly, the amount not yet allocated is not an indication of its current market value. To learn more, see Explanation of Depreciation To Top
Allocation of cost of a fixed asset to expense over its working life. Measure of the cost of using the fixed asset in each accounting period. Reduces profit available for dividend. Land is not depreciated.
Fixed assets like property, plant and equipment require an immediate expenditure. But since these assets are productive and will generate income over a period of their useful economic life, the expenditures are capitalized (recorded as an asset) and expensed (depreciated) over a period consistent with their life.
The portion of the cost of a capital asset representing the expiration in the useful life of the capital asset attributable to wear and tear, deterioration, action of the physical elements, inadequacy, and obsolescence which is charged off during a particular period. In accounting for depreciation, the cost of a capital asset, less any salvage value, is prorated over the estimated useful life of such an asset. Refer to COMPOSITE METHOD and STRAIGHT-LINE METHOD.
The accounting practice where the cost of a fixed asset of a business is spread over the life of the asset. Depreciation is a non-cash expense which allows the money to be retained by the business, thus technically allowing the business the capacity to replace the asset over time.
A charge against earnings that does not involve a cash payment for the writeoff of the cost of an asset less salvage value over its estimated useful life. A variety of depreciation methods have been developed to specify the rate and amount of the writeoff for each fiscal period.
Total amount charged to cover the vehicle's projected decline in value through normal use during the lease term as well as other items that are paid for over the lease term. It is calculated as the difference between the adjusted capitalized cost and vehicle's residual value. This amount is a major part of your base monthly payment.
A charge against earnings over an extended period of time to recognize that a tangible asset such as a building or truck is losing value as it wears out. The implication is that the asset will eventually have to be replaced, and this will cost money. Depreciation does not actually use cash in the period in which it is charged.
Decline in value of business facilities and capital goods owing to the predictable wear and tear over their operating lives, often amortized for tax purposes over a prescribed number of years. See also “amortization.
1.) Expiration in the service life of capital asset attributable to wear and tear, deterioration, action of the physical elements, inadequacy obsolescence. 2.) That portion of the cost of a capital asset which is charged as an expense during a particular period.
shrinkage in the value of fixed assets, recognized by the periodic allocation of the original cost of the asset in current operations. It is merely a method of systematically allocating the original cost over the asset’s useful life due to deterioration or obsolescence. In other words, it is a systematic process by which the original cost of a long-term asset, such as a building, is reduced and carried on the union's books at a lesser figure.
The expending of capital assets over the useful life of the asset. If the asset is intangible (rather than a tangible fixed asset), the process of expending over the useful life is called amortization.
The recognition of part of an asset's cost as an expense during each year of its useful life. There are several acceptable methods for calculating this expense, including straight-line depreciation and various accelerated methods. See also double-declining balance, straight-line method, and sum of the years' digits.
A reduction in the value of fixed assets. The most important causes of depreciation are wear and tear, the effect of the elements, and gradual obsolescence which makes it unprofitable to continue using some assets until they have been exhausted. The purpose of the bookkeeping charge for depreciation is to write off the original cost of an asset (less expected salvage value) by equitably distributing charges against operations over its entire useful life.
an annual tax deduction for wear and tear and loss of utility of property. Example: Tax depreciation allows a tax deduction without a cash payment, thus providing an important benefit to real estate investors. A tax depreciation deduction may be claimed even when the propertyâ€(tm)s market value increases. The annual tax depreciation deduction allowed for improvements (land is not depreciable) is 3.64% for rental housing and 2.56% for commercial and industrial property.
The loss in value to property due to wear and tear, obsolescence, or economic factors. To offset depreciation loss, tax laws permit recovery of the cost of an investment through annual deductions from taxable income.
The systematic method of ratably deducting the cost of tangible property having a useful life or more than one year, used in a trade or business or held for the production of income, over its assumed useful life. Currently, the IRS requires use of the modified accelerated cost recovery (MACRS) system for this purpose.
A reasonable "allowance" for wear and tear and obsolescence of equipment used in a trade or business; allows the "owner" of the equipment (often the lessor rather than the end user for leased equipment) to "recover" the cost of equipment over its useful life through annual tax benefits (listed in financial statements as "book depreciation").
Provision by which, for example, a business that invests $1 million buying a new machine is not allowed to fully deduct that cost when calculating its taxable income. Instead, it may deduct only a portion of the cost each year. Depreciation is complex, and it increases the tax burden on investment.
The loss of value of assets, such as buildings and transmission lines, due to age and wear. Among the factors considered in determining depreciation are wear and tear, decay, action of the elements, inadequacy, obsolescence, changes in the technology, changes in demand, requirements of public authorities and salvage value. Depreciation is charged to utility customers as an annual expense.
The cost of wear and obsolescence associated with implements, machinery and structures over time. It is usually calculated on an annual basis. If the cost of depreciation is thought to be relatively constant in each period (year) (e.g. as in the case of buildings), it is calculated by the "straight-line method" as
The recovery of capital used to construct or acquire utility assets. The amount of this expense is determined by the decline of the service value of utility assets over time due to wear, tear, deterioration or technological advances.
In the cost approach to value, this is the amount of depreciation, from any and all sources, that affects the value of the property in question. Assessors determine what depreciation can be applied to your property following schedules and regulations contained in the Saskatchewan Assessment Manual.
Periodic wearing away of property over the propertyâ€(tm)s economic life. The I.R.S. requires investors and business owners to take a tax deduction on the amount of a propertyâ€(tm)s depreciation. The practice of amortizing or spreading the cost of depreciable property over a specified period of time, usually its estimated depreciable life. To put it another way, you are allowed a deduction on your income tax return for the wearing away and expensing over time of property or assets, such as aircraft, vehicles, livestock and buildings. A depreciable asset is a capital expenditure in depreciable property; used in a trade or business or held for the production of income and has a definite useful life of more than one year. Non-depreciable property includes vacant land. For assets that have an expected useful life of more than one year, you spread the cost of the asset over its estimated useful life rather than deducting the entire cost in the year you place the asset in service. The tax code (law) specifies the depreciation period for specific types of assets.
A tax deduction representing a reasonable allowance for exhaustion, wear and tear, and obsolescence, that is taken by the owner of the equipment and by which the cost of the equipment is allocated over time. Depreciation decreases the company's balance sheet assets and is also recorded as an operating expense for each period.
A calculation for wear and tear on the company's plant and equipment; this figure can be manipulated, e.g. when a company cuts the number of years that it expects equipment to last, the depreciation figurebecomes higher, and this reduces profits.
Charges made against income to provide for distributing the cost of depreciable plant less estimated net salvage over the estimated useful life of the asset in such a way as to allocate it as equitably as possible to the period during which such services are obtained from the use of the facilities. Among the factors to consider are: wear and tear, decay, inadequacy, obsolescence, changes in demand and requirements of public authorities.
The diminution through time of the value of a fixed asset. In other words, an allowance for things wearing out. There is normally a charge in the profit and loss account to account for this. It is purely an accounting feature and has no effect on the cash flow. In a steady state the capital expenditure of a company will normally equate to the depreciation charge.
Is the charge against revenues which represents a prorated capitalization of the cost of an asset. For example, if a computer is expected to have a useful life of 5 years and cost $6,000 with no salvage value, then the annual, straight-line depreciation would be $1,200 per year. If the same computer had an estimated salvage or residual value of $500, then the annual depreciation would be $1,100 ($6,000 - 500 = $5,500 divided by 5 years).
The sum to which the value of a fixed asset has decreased in any period. Depreciation is calculated according to the value of the asset, the period in which it is depreciated and the method of depreciation, it is a non-cash expense.
An allocation made, as an expense, of the cost or other value of an asset, in each financial reporting period over the life of the asset. The standard meaning of the term, consistent with cost-based asset 'valuation', is the allocation of the cost of the asset over time. (Advocates of 'economic' valuation (see below) substitute for this the alternative concept of depreciation as the reduction in each time period of the economic value of the asset.)
The decline in value of property from any cause - such as use, wear-and-tear, obsolescence, etc. Depreciation is taken into account when arriving at the proper amount to be insured, or the amount of loss to be paid, unless the insurance is on a valued or replacement cost basis.
this term actually has three meanings: 1) the disparity between the cost of replacing a property and the market value of the property, as determined by an appraisal.2) the yearly right of part of an asset made during accounting procedures.3) the reduction in property value, usually occurring over some time.Depreciation may result from neglect of a property, sudden changes in a neighborhood, and property damage.
an expense that is supposed to reflect the loss in value of a fixed asset. For example, if a machine will completely wear out after ten year's use, the cost of the machine is charged as an expense over the ten-year life rather than all at once, when the machine is purchased. Straight line depreciation charges the same amount to expense each year. Accelerated depreciation charges more to expense in early years, less in later years. Depreciation is an accounting expense. In real life, the fixed asset may grow in value or it may become worthless long before the depreciation period ends.
Depreciation is a provision made by companies to allow for wear and tear of assets. Companies are allowed to deduct depreciation from their profits before they are assessed for tax. Since depreciation is charged against profits but the money is not paid out to anyone it is usually added back to after-tax profits to calculate a company's cash flow.
An exchange rate changes when one unit of the base currency buys more or less units of the quoted currency. So if the USD/JPY rate changes from 112.85 to 113.14, one USD buys more yen. The dollar has strengthened or appreciated against the yen. If the USD/JPY rate changes from 112.85 to 112.42, one USD buys less yen. The dollar has weakened or depreciated against the yen.
The amount of "wear and tear" on a piece of equipment or a building. Usually, this amount is spread out equally over a fixed time span. Buildings usually depreciate equally over 27.5 years; furnaces over 15 years; carpeting over 7; that is, each year the building is worth 1/27.5 less; the furnace 1/15 less and the carpeting 1/7 less. The IRS lets you deduct these amounts each year from the co-op's earned income. (Note: Land does not depreciate.)
A loss in the value of property over the time the property is being used. Events that can cause property to depreciate include wear and tear, age, deterioration, and obsolescence. You can get back your cost of certain property, such as equipment you use in your business or property used for the production of income, by taking deductions for depreciation.
The amount by which an asset falls in value within a given period (i.e. a financial year), also called actual depreciation. Accounting depreciation can differ to actual depreciation. Assets owned by a business (e.g. cars, machinery etc.) are depreciated each year over their useful life until their value is zero in the business' balance sheet. The amount of accounting depreciation, also called the "charge for depreciation" can be used to reduce taxable profits, thereby reducing a company's tax bill.
An accounting procedure that spreads the assetâ€™s purchase cost over its depreciable life. (For example, a fixed asset that cost $10,000 and lasted 10 years could be depreciated by $1,000 per year for 10 years. For accounting purposes, this reduces its value by $1,000 each year until, at the end of its â€œuseful lifeâ€, it is worth nothing.) Depreciation reduces taxable income but does not reduce cash.
In taxation, a deduction taken to account for the decline in value of assets, such as machines used in a business, over a period of time. Used to offset the cost of acquiring the asset. See also expensing.
Also called obsolescence. In the real estate industry, it is a loss in value due to any cause and consists of 3 components: Â· Physical: actual material wear and tear.Â· Functional: out dated or substandard design, layout, technology, etc.Â· External (aka economic): negative influences beyond a propertyâ€(tm)s borders. Depreciation may be curable (where the value gained is greater than the cost to repair) or incurable (where the cost to repair exceeds the value gained).
The reduction in the value of a property caused by changes in market conditions (eg: the slowing down of the housing market). In extreme cases, this can result in â€˜negative equityâ€(tm) where the value of the proprerty is less than the value of the mortgage secured upon it
An allowance made for loss in value of a fixed asset because of wear or age. The cost of the fixed asset is allocated over its estimated useful life, using the straight-line method. The estimated useful lives of fixed assets such as plants, rental machines, and other properties generally are as follows: buildings, 50 years; building equipment, 20 years; land improvements, 20 years; plant, laboratory, and office equipment, 2 to 15 years; and computer equipment, 1.5 to 5 years. Listed in the assets category on the statement of financial position.
The method for recovering the cost of a capital asset (building, equipment, etc.). The annual depreciation amount is calculated by dividing the cost of the asset by the number of years of its useful life. OMB Circular A-21 specifies that for F&A cost calculations, assets are to be depreciated using the "straight line" method, and any federal funds used to purchase the asset must be deducted from the cost prior to the calculation. (See also GIM 22A)
A decrease in value through age, wear or deterioration. Depreciation is a normal expense of doing business that must be taken into account. There are laws and regulations governing the manner and time periods that may be used for depreciation.
An allowance made for loss in value of a fixed asset because of wear or age. The cost of the fixed asset is allocated over its estimated useful life, using either the straight-line method or the written down value method. Listed in the assets category on the balance sheet.
The decline in value of a property due to the physical deterioration, age, functional or economic obsolescence. (Tip â€“ If used for a business, many people may use a portion of their home as a home office, and depreciate their homeâ€™s value to save money for tax purposes. Always consult an accountant before making such decisions.)
An allowance for wear or age made to the value of a fixed asset, allocating its cost over its estimated useful life. Listed in the assets category on the statement of financial position. See also book value.
The amount the vehicle declines in value over the term of the lease. The depreciation may be calculated by subtracting the residual value from the adjusted capitalized cost. Using this method, the depreciation amount will also include any amounts that were added by agreement to the price of the vehicle to arrive at the gross capitalized cost. If you have a loan, the same principle applies as stated above except it relates to the declining loan balance after payments are applied. Further, the depreciated value is based on a number of factors including, but not limited to, mileage, condition and resale market conditions, among other factors.
A bookkeeping entry that does not require cash outlay nor funds to be earmarked. The entry is a charge against earnings to write off the cost of an asset over its assessed useful life over a set time period. It reduces taxable income but does not reduce cash. The most commonly used depreciation methods are Straight-line Depreciation and Accelerated Cost Recovery System (ACRS).
The decrease in value of tangible property (without loss of property) due to cause s such as wear, tear, age, and obsolescence. [D02650] PMDT A charge to current operation s which distributes the cost of a tangible capital asset, less estimate residual value, over the estimate d useful life of the asset in a system atic and logic al manner. It does not involve a process of valuation. [D03492] GAT
Spreading out the cost of a capital asset over its estimated useful life or a decrease in the usefulness, and therefore value, of real property improvements or other assets caused by deterioration or obsolescence.
An allocation of the original value of an asset against current income to represent the declining value of the asset as a cost of that time period. Depreciation does not involve a cash payment. It acts as a tax shield and thereby reduces the tax payment. See: capital recovery, depletion, double-declining-balance depreciation, straight line depreciation, units-of-production depreciation.
The value of assets usually decreases as time goes by. The amount or percentage it decreases by is called depreciation. This is normally calculated at the end of every accounting period (usually a year) at a typical rate of 25% of its last value. It is shown in both the profit & loss account and balance sheet of a business. See straight-line depreciation .
The decrease in the market value of a vehicle over time. The amount of yearly depreciation is influenced by car condition, supply and demand in the resale marketplace, and reputation of the manufacturer and model. Convertibles, autos with large engines, trucks, and vans tend to depreciate less than other vehicles.
In accounting this refers to the process of allocating a portion of the original costs of a fixed asset to each accounting period so that the value is gradually used up (written off) during the course of the asset's estimated useful life.Çíîøåí³ñòü, àìîðòèçàö³ÿÂ áóõãàëòåðñüêîìó îáë³êó öåé òåðì³í îçíà÷àº ñïèñàííÿ ÷àñòèíè ïåðâèííî¿ âàðòîñò³ îñíîâíîãî êàï³òàëó â êîæíèé çâ³òíèé ïåð³îä òàêèì ÷èíîì, ùî â ê³íö³ ê³íö³â âñÿ âàðò³ñòü òîãî ÷è ³íøîãî îá'ºêòó îñíîâíîãî êàï³òàëó âèÿâëÿºòüñÿ ïîâí³ñòþ ñïèñàíîþ çà ÷àñ ñëóæáè.
In appraising, a loss in property value from any cause. In regard to improvements, deterioration and obsolescence. In accounting, an allowance made against the loss in value of an asset for a defined purpose and computed using a specified method.
A fall in the value of a country's currency on the exchange market, relative either to a particular other currency or to a weighted average of other currencies. The currency is said to depreciate. Opposite of " appreciation." The decline in value or usefulness of a piece of capital over time, and/or with use.
In accounting terms, the expensing of an asset over its estimated useful life on a systematic and rational basis. This expensing of an asset is usually related to its lost usefulness, expired utility, or diminution of services. Through this process the entire cost of an asset is ultimately charged off as an expense.
Reduction of the value of real estate or other property. Vacation properties are not necessarily prone to depreciation, though they are likely to cost much less on the resale market than what the developer was able to charge for them initially.
1)Expiration in the service life of fixed assets, other than wasting assets, attributable to wear and tear, deterioration , action of the physical elements, inadequacy and obsolescence. 2)The portion of the cost of a fixed asset, other than a wasting asset, charged as an expense during a particular period. In accounting for depreciation, the cost of a fixed asset, less any salvage value, is prorated over the estimated service life of such an asset, and each period is charged with a portion of such cost. Through this process, the entire cost of the asset is ultimately charged off as an expense.
A form of tax deduction that permits the recovery of the cost of an asset over its useful life in the form of tax savings. It is a bookkeeping entry and does not represent a cash outlay. The simplest method is straight-line depreciation, which allocates a constant amount each year during an asset's life. For example, an asset with a useful life of 10 years and no salvage value would generate a deduction of 10% of its cost annually. Accelerated depreciation is a method that permits deduction of a greater percentage of the cost of an asset in the early years of the asset's useful life with smaller deductions in later years. Examples of accelerated depreciation are the double-declining balance and the sum of the years-digits method. A recent method put into use is the Accelerated Cost Recovery System (ACRS), which applies accelerated methods of cost recovery over statutory periods.
Distributing the cost of a major asset over the years in which it produces revenues; calculated by each year subtracting the asset's original value divided by the number of years in its productive life.
A method for determining the useful life of a piece of equipment and for costing its value over the years of its active use. The total depreciation expense is equal to the difference between the initial cost of the unit and its estimated residual or salvage value. When divided over the years of the equipment's usefulness, this periodic expense can be deducted from income taxes each year.
Tefers to loss in value of real property. Timeshare properties do not depreciate per se; however, they seldom command a price in the resale market comparable to that originally paid in the developer's sales center.
The decrease in the market value of a vehicle over time. The amount of yearly depreciation is affected by variables including car condition, resale market supply and demand, and reputation of the manufacturer and/or model.
The amount of expense charged against earnings by a company to write off the cost of a plant or machine over its useful live, giving consideration to wear and tear, obsolescence, and salvage value. If the expense is assumed to be incurred in equal amounts in each business period over the life of the asset, the depreciation method used is straight line (SL). If the expense is assumed to be incurred in decreasing amounts in each business period over the life of the asset, the method used is said to be accelerated. Two commonly used variations of the accelerated method of depreciating an asset are the sum-of-years digits (SYD) and the double-declining balance (DDB) methods. Frequently, accelerated depreciation is chosen for a business' tax expense but straight line is chosen for its financial reporting purposes.
A bookkeeping entry which allows a charge against earnings to account for the decrease in property value through deterioration, wear or obsolescence. No specific funds are used, and no cash outlay is required.
an expense charged against profit for the use of a Fixed Asset. Over the useful life of the Fixed Asset, the depreciation charge will equal the loss in value from Original Cost to Residual Value - see also Methods of Depreciation.
A method of recovering your purchase price or other basis in an asset over its life rather than deducting the full amount immediately. An expense for book purposes or a deduction for tax purposes. Depreciation is often different for book and tax purposes. See Accelerated Depreciation above.
(1) Decrease in the usefulness, and therefore value, of real property improvements or other assets caused by deterioration or obsolescence. (2) A loss in value as an accounting procedure to use as a deduction for income tax purposes.
The decline in the value of an automobile due to normal wear and tear. Based primarily on the number of miles driven (the more miles driven, the greater the depreciation) but also may be influenced by vehicle model, maintenance, general consumer demand for the model and the maker's reputation for quality.
Annual write-off for accounting purposes to represent the deterioration of an asset over its useful life. Under a finance lease, the lessee must account for the asset as a capital item, following the accounting rules for fixed assets. The lessor records in his balance sheet a receivable of the amount of the minimum lease payments, excluding earnings allocated to future periods. Under an opening lease, only the lessor is concerned with the depreciation. Capital allowances represent depreciation for tax purposes, but are subject to different treatment from accounting depreciation.
A sum representing presumed loss (from physical wear and economic obsolescence) in the value of a building or other real-estate improvement and deducted annually from net income to arrive at taxable income.
Depreciation is the name given to the amount charged to the profit and loss account to reflect the wearing out of a fixed asset over its useful life. The purpose of depreciation is to comply with the accruals concept. Since the benefit of a fixed asset is received over several periods, the cost of acquiring the asset is charged against profits over those periods. There are several methods available to calculate depreciation. The two most popular approaches are the â€œstraight-lineâ€ and â€œreducing balanceâ€ methods. It should be noted that the depreciation charge in the profit and loss account has no effect on the cash flows of a business. It is simply a subjective estimate of the amount by which the value of a fixed asset has fallen below its original purchase cost. Note: not all fixed assets are depreciated. For example, the value of land is rarely depreciated because its value uslaly grows, not falls over time.
A prorated lessening of value assigned to a capital asset based upon its useful life expectancy and initial cost. See: Income - Special Income Types especially Self-employment income - General rules; and Self-employment expenses that are not allowed as income deductions; and Clarifying Information
An allowance made (charged as an expense in the profit and loss account) for the reduction in value of fixed assets, (particularly machinery, furnishings and motor vehicles) during each accounting period. See page 99 for more details.
The fall in the value of a fixed asset over time. If you run a factory making widgets your machinery will eventually wear out and need to be replaced. The equipment loses its resale value the older it is. Depreciation is the measure of this effect in a company's accounts.
A system of accounting used to allocate the cost of an asset (less residual value if any) over its estimated useful life. Depreciation recognises the gradual exhaustion of the asset's service capacity.
Certain assets, such as buildings and equipment, depreciate, or decline in value, over time.You can amortize, or write off, the cost of such an asset over its estimated useful life, thereby reducing your taxable income without reducing the cash you have on hand.
This is the amount by which property (in this case, a vehicle) loses its value. In leasing, depreciation is the difference between the new car's cost and the value of the car at the end of the lease (plus tax, interest and various leasing fees).
The deduction of a reasonable allowance for the wear and tear of assets (excluding inventory) used in a trade or business or held for the production of income. In a more narrow sense, the term depreciation refers to the method used to write off the cost or other basis of assets placed in service before 1981 over their estimated useful lives.
A decline in asset values. Property can depreciate as a result of age, obsolescence or lack of maintenance. Depreciation is also a term for writing down the value of an asset over the life of the asset for accounting purposes.
A method of calculating and writing off the costs of fixed assets, such as machinery, buildings, trucks, and equipment. Investment in such fixed assets, which wear out or become obsolete over time, is a normal expense of business.
Normally, charges against earnings to write off the cost, less salvage value, of an asset over its estimated useful life. It is a bookkeeping entry and does not represent any cash outlay nor are any funds earmarked for the purpose.
(1) for tax purposes, a non-cash expense real estate investors claim, based on purchase price of real estate (excluding land). For real estate, depreciation is claimed on the straight-line basis (the same amount claimed each year) over 27.5 years (for residential property) or 39 years (for non-residential property). (2) for appraisal purposes, a reduction in appraised value based on the age and condition of property.
A means for a firm to amortize the cost of a purchased asset, over time, through periodic deductions or offsets to income. Depreciation is used in both a financial reporting and tax context, and is considered a tax benefit because the depreciation deductions cause a reduction in taxable income, thereby lowering a firm's tax liability.
Depreciation is a non-cash charge that represents a reduction in the value of fixed assets due to wear, age, or obsolescence. This figure also includes amortization - or expensed portion - of leased property, intangibles, goodwill, and depletion.
The accounting method which charges a portion of the cost of a capital asset to expense throughout the useful life of the asset. This method has the effect of evening out the expense of purchasing a capital asset over several accounting periods or years. Absent a depreciation policy, the entire cost of an asset would be charged as an expense in the year of purchase.
Amortization of fixed assets, such as furniture and fixtures, so as to allocate the cost over their estimated useful lives. Depreciation reduces the carrying value of property, plant and equipment earnings but does not reduce cash.
Depreciation is a term used to describe the worsening of a currencies value due to various economic factors. Depreciation is caused when supply outweighs demand, for whatever reason, and because of the surplus currency on the market its value to investors drops. Depreciation is the opposite of appreciation.
A means of accounting for the wearing out or gradual obsolescence of a utility plant's equipment and buildings. As this occurs, an allowance for depreciation expense is made by the PUC that a carrier can charge for transporting materials and are published in minimum rate tariffs (MRTs). It is unlawful to charge below these rates, unless the Commission approves a deviation.
A charge made against a Company's gross profit to take into account wear and tear or obsolescence of its assets. This charge is set against the asset's value to establish its true worth to the Company. Funds so charged may be set aside to replace or refurbish assets so treated. See also 'Amortisation'.
A decrease in value of real property caused by age, use, obsolescence and physical deterioration. A noncash accounting expense that reflects the allowable deduction in book value of assets such as machinery, buildings or breeding livestock.
The decrease in the value of an asset allowed when computing property value for tax purposes. It can also be a loss in the appraised value of a property due to physical deterioration. This latter type of depreciation is curable when it can be remedied by repair or an addition to the property, and incurable when there is no easy or ecomomic remedy.
This is the estimate of the decrease in value in a wasting asset (not land) due to such factors as use and obsolescence. In Nevada, for purposes of real property appraisal, depreciation is calculated at 1.5 percent of the cost of replacement for each year up to 50 years. Personal property depreciation is calculated according to a schedule approved by the Nevada Tax Commission. For purposes of taxation motor vehicles are not considered personal property and are not subject to property taxes. They are however subject to a separate government services tax.
The annual reduction in the value of an asset attributed to normal wear and tear. Depreciation is based primarily on miles driven. The greater the miles, the greater the depreciation. Annual depreciation rates for autos are also influenced by vehicle model, maintenance, general consumer demand for the model, and the maker's reputation for quality. Luxury cars retain their value longer and, hence, depeciate more slowly. Depreciation expense is used to calculate the residual value for preparing closed-end leases.
Means for a firm to recover the cost of a purchased asset, over time, through periodic deductions or offsets to income. Used in both a financial reporting and tax context. Considered a tax benefit because the depreciation deductions cause a reduction in taxable income, and therefore, the firm may experience a lower tax liability.
1. In appraising, a loss in property value from any cause; the difference between the reproduction or replacement cost of an improvement on the effective date of the appraisal and the market value of the improvement on the same date; 2. In regard to improvements, depreciation encompasses both deterioration and obsolescence.
Depreciation is an accounting term that refers to loss of value of real property due to age, physical deterioration, or functional obsolescence. Also, it is the change in value of a real estate investment over the useful life of the investment.
As applied to a depreciable electric plant, this term means the loss in service value, not restored by current maintenance, incurred in connection with the consumption or prosective retirement of the elctric plant in the course of service, from causes which are known to be in current operation, and against which utility is not protected by insurance.
Straight Line Depreciation: the provision each year of a fixed proportion of the original cost of the asset; Diminishing Value Depreciation: the provision by annual instalments of a diminishing amount computed by taking a fixed percentage of the book value of the asset as reduced by previous provisions.
a decrease in a currency's value which occurs under a floating exchange rate regime. If the A$ was worth US$0.54 and is now worth US$0.50 it has depreciated against the US$ (equally the US$ has appreciated against the A$)
is also termed capital consumption. TME includes public sector expenditure gross of the depreciation of capital assets used to produce non-market services. Public sector net investment deducts an aggregate charge for all depreciation (market and non-market) from gross capital spending.
A decrease in a property's value. Your home can lose value over time due to any number of reasons, such as poor condition, an over supply of homes in the market, or a declining neighborhood. If you buy a house for $100,000 and sell it two years later for $90,000, your home has depreciated by $10,000. Unless it's a rental property, you don't get any tax deductions on this loss.
A decline in the value of a home as a result of time, changes in the housing market, wear and tear, adverse changes in the neighborhood and its patterns, or for any other reason. Source: The Massachusetts Homeownership Collaborative
The allocation or distribution of the cost of capital assets, less any salvage value, to expenses over the estimated useful life of the asset in a systematic and rational manner. Depreciation for the year is the amount of the allocation or distribution for the year involved.
A loss of utility and hence value from any cause, an effect caused by deterioration and /or obsolescence. Deterioration or physical depreciation is evidenced by wear and tear, decay, dry rot, cracks, incrustation, or structural defects. Obsolescence is devisable into two parts, functional and economic. Functional obsolescence may be due to poor plan, mechanical inadequacy or overadequacy, functional inadequacy or overadequacy due to size or style, age, etc. It is evidence by conditions within the property. Economic obsolescence is caused by changes external to the property such as neighborhood infiltrations by inharmonious groups or property uses, legislation, etc. It is also the actual decline of market value of the improvement to land from time of purchase to time of resale.
A common foreign exchange term describing the event of one currency weakening or decreasing in value relative to another currency. Depreciation is generally used to describe permanent or long term devaluation of currencies as opposed to daily or short term market movements. Often the term indicates the formal devaluation of the currency or intervention by a central bank.
Depreciation is a decrease in the value of an asset, caused by wear and tear or by obsolescence. In accounting, the act of depreciating an asset is also supposed to create a reserve for the replacement of the asset. The use of depreciation affects a company's (or an individual's) financial statements, and, more importantly to them, their taxes.
The decrease in the value of a capital asset with time. The method of depreciation is set by income tax rules that allow various rates of depreciation. The amount depreciated each year is considered an expense for tax purposes (Winston, 1995)
Charges made against earnings to write off the cost of a fixed asset over its estimated useful life. Depreciation does not represent a cash outlay. It is a bookkeeping entry representing the decline in value of an asset that is wearing out.
This is the expense associated with the systematic write off of assets used to run your business. The rate of this write off is determined by the useful life of the asset. If an assets has a useful life of 5 years then the depreciation rate used is 20% (100% / 5 years = 20%)
An allowance provided by the Tax department on building structures, fixtures and fittings.This is an allowance to deduct the cost of wear & tear on your building,fixtures & fittings annually. The amount deducted is taken off your income saving you tax. Hide Definition
A proportion of the value of capital assets is deducted on an annual basis to reflect, in theory, the rate at which their value diminishes over their useful life. The amount is then applied as a charge to the profit and loss account.
The expense recognized in writing off the cost of a plant or machine over its useful life, giving consideration to wear and tear, obsolescence, and salvage value. Methods vary. Examples are straight line (SL), accelerated methods such as sum-of-the-years digits (SYD), and double-declining balance (DDB) methods. Primarily accelerated depreciation is chosen for a business' tax expense but straight line is chosen for its financial reporting purposes.
Decline in value of a property due to use, wear and tear, obsolescence or deterioration. Alternately, spreading out of the original cost over the estimated life of the fixed assets such as plant and equipment to reduce taxable income.
The decline in value of a limited-life tangible asset, such as a building, machine, vehicle, equipment, furniture, etc., due to age, and to the normal wear and tear of use. In general, depreciation assigns to a fiscal period a portion of the original cost of the capital cost asset.
a percentage of the cost of capital equipment is written off each year and is called depreciation. Typically five year for process equipment, ten years for facility systems and thirty years for the bricks and mortar.
Except for land, assets wear out. The value goes down and can be deducted from your business as an expense. Present values of assets are shown as original cost less depreciation. Market value, or the price you could sell it for, could differ from this figure.
(I) In appraisal, a loss of value in property due to any cause, including physical deterioration, functional obsolescence and external obsolescence. (2) In real estate investment, an expense deduction for tax purposes taken over the period of ownership of income property.
A non-cash writing-down of the cost of an asset over its useful life.
A deduction from business profits made to write off the cost of capital assets over their expected useful lives. Depreciation is not an allowable expense for tax purposes, but is capital allowances given an equivalent kind of tax deduction.
Depreciation is a term used in accounting, economics and finance with reference to the fact that assets with finite lives lose value over time. (There is also a separate use in international finance to refer to a reduction in the exchange rate of a currency - see devaluation).
a devaluation in the replacement cost of an item or material based on the life expectancy of that item or material. Depreciation can be both recoverable and non-recoverable depending on the type of coverage your policy provides.