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in accountingaccounting,
classification, analysis, and interpretation of the financial, or bookkeeping, records of an enterprise. The professional who supplies such services is known as an accountant. Auditing is an important branch of accounting.
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, reduction in the value of fixed or capital assets, as by use, damage, weathering, or obsolescence. It can be estimated according to a number of methods. In the straight-line method, depreciation is simply seen as a function of time; the cost of the asset, minus its value as scrap, is divided by an estimate of its life. Other methods distribute depreciation over the life of the asset by gradually increasing, or gradually diminishing, installments. The resale value of a machine generally declines most quickly during its early years; thus its depreciation is measured in decreasing installments. The opposite is true of rights of limited duration, such as copyrights and leaseholds, whose value depreciates most quickly as their date of expiration approaches. The technical name for the depreciation of such nonmaterial rights is amortization. The problem of calculating depreciation has special importance because of the need for accuracy in income tax returns. Failure to make allowance for depreciation results in overestimating income. Depreciation of money is brought about by a decline in the price of a particular currency in terms of other currencies, thereby lowering the foreign exchange value of the first currency.


See J. D. Coughlan, Depreciation (1969); R. P. Brief, ed., Depreciation and Capital Maintenance (1984).


The reduction in the value or worth of an asset, such as a building, through physical deterioration over time, and general obsolescence.


(industrial engineering)
Loss of value due to physical deterioration.


Economics a decrease in the exchange value of currency against gold or other currencies brought about by excess supply of that currency under conditions of fluctuating exchange rates
References in periodicals archive ?
Pursuant to section 1016(a)(2) (1) of the Internal Revenue Code (Code), (2) the basis of depreciable property is reduced by all depreciation deductions including those that produce no tax benefits for the taxpayer.
This is because all the recognized gain would be attributable to the useless tax depreciation deductions that reduced the asset's basis (3) below its original cost (hereinafter referred to as the "Basis Reduction Tax Trap").
7) Because the apartment building generated minimal rental income over that period, only $3,307 of the $28,000 of allowable depreciation deductions actually produced any tax benefits for Beulah.
One explanation for this phenomenon is that Beulah's novel reporting position (rejected by the Supreme Court) completely nullified the role of depreciation and basis reduction in the computation of her taxable gain.
Another explanation is that in its disapproval of Beulah's reporting position, though inconsistent with the facts contained in the Record of the case, (14) the Supreme Court cast Beulah as a tax villain creating the myth that her ultimate purpose was to enjoy the unwarranted benefit of double depreciation deductions.
Yet, even if Crane had been viewed as a Basis Reduction Tax Trap case, there was long-standing judicial precedent including two landmark Supreme Court cases (17) decided prior to Crane, holding that the section 1016(a)(2) basis reduction was mandatory whether or not the depreciation deductions produced tax benefits (hereinafter the "No Tax Benefit Decisions").
On the other hand, notwithstanding the likelihood of an adverse decision against Beulah, a closer examination of the No Tax Benefit Decisions reveals their main focus was to thwart taxpayer attempts to manipulate the timing of the depreciation deduction and the corresponding basis reduction in efforts to achieve the optimal tax benefit from it.
Helvering, (23) the other Supreme Court No Tax Benefit Decision decided prior to Crane, the taxpayer claimed depreciation deductions early in the depreciation recovery period that were in excess of the allowable amount.
Recognizing the importance of the mandatory section 1016(a)(2) basis reduction to prevent taxpayer abuse, however, any such amendments must not compromise the integrity of the depreciation deduction protected by the No Tax Benefit Decisions.