depreciation

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depreciation,

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.

Bibliography

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

Depreciation

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

depreciation

[di‚prē·shē′ā·shən]
(industrial engineering)
Loss of value due to physical deterioration.

depreciation

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 ?
Accumulated depreciation is a contra account to non-current assets that reports the total amount of the cost allocated since the asset was put into use.
Should the disclosures relating to property, plant, equipment, and intangible assets and related accumulated depreciation, depletion, and amortization be required when interim financial statements are presented?
The amount of an "impairment loss" would be determined by taking the original cost less accumulated depreciation, thus arriving at the carrying cost.
In accordance with IAS 16, Property, Plant and Equipment, after initial recognition, an item of PP&E which has a fair value that can be measured reliably may be carried at a revalued amount, which is defined by its fair value at the date of the revaluation, less any subsequent accumulated depreciation and subsequent accumulated impairment losses.
Prior to recapture, the depreciable base would be $5,000 and the accumulated depreciation through 2008 would have been $17,600 ($5,000 x 52% + $15,000 of Sec.
The allocation is recorded as Depreciation Expense each year and is accumulated in the Accumulated Depreciation account.
Because the gain ($25,000) is less than the accumulated depreciation deductions ($40,000), the entire gain is "recaptured" as ordinary income, so the entire gain is attributable to previous years' depreciation deductions.
The accounting shows the credit as a liability (exhibit 2: net book value of zero less the $422,500 retirement liability), whereas depreciation accounting results in a negative--and counter-intuitive--net asset balance (exhibit 3: asset balance of $1 million less accumulated depreciation of $1,422,500, and no retirement liability).
It also proposes to add another new Item 302(d) of Regulation S-K to elicit certain information concerning tangible and intangible long-lived assets and related accumulated depreciation, depletion and amortization.
More important, once the initial cumulative difference between the AMT and regular tax accumulated depreciation is determined, taxpayers would be relieved of the obligation to continue tracking those assets for AMT purposes.
Operational assets equal total assets plus accumulated depreciation minus net plant, equipment, and inventories.

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