- The amount by which a fixed asset's accounting or book value is periodically reduced to reflect the fact that the economic value of the asset is steadily reduced by a combination of wear and tear from use, age, and/or obsolescence. The offsetting entry is depreciation expense. American Banker Glossary————A non-cash expense (also known as non-cash charge) that provides a source of free cash flows.. Amount allocated during the period to amortize the cost of acquiring long-term assets over the useful life of the assets. To be clear, this is an accounting expense not a real expense that demands cash. The sum of depreciation expenses of prior years leads to the balance sheet item Accumulated Depreciation. Bloomberg Financial Dictionary————Decline in the value of one currency relative to another. Occurs when, because of a change in exchange rates, a unit of one currency buys fewer units of another currency. Chicago Mercantile Exchange Glossary————Amounts charged to the profit and loss account to reflect the wearing out of a fixed asset 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. Dresdner Kleinwort Wasserstein financial glossary————The reduction in the book or market value of an asset. Exchange Handbook Glossary————Accounting procedure that spreads the cost of an asset over the life time of the asset. Financial Services Glossary
* * *US /dɪˌpriːʃiˈeɪʃən/ noun [U]► ACCOUNTING, TAX the amount by which something, such as a piece of equipment, is reduced in value in a company's financial accounts, over the period of time it has been in use. The loss in value reduces a company's profits, and the amount of tax it must pay: »
Expenses include depreciation of equipment as well as business insurance.»
a depreciation charge/deduction► ACCOUNTING the practice of spreading the cost of capital expenditure over several years, especially in order to improve cash flow► MONEY, FINANCE the amount by which a currency loses value in comparison with other currencies: »
The depreciation of the dollar affected the British economy.»
the depreciation of sterling against the euro»
Depreciation in the peso since last December could dent sales and cut profit.► FINANCE, INSURANCE a loss of value, especially over time: »
After three years, this car is projected to be worth 57% of its price when new - one of the lowest rates of depreciation of any car in any class.»
The insurance guarantees that the goods will be replaced at their present market value, without any deduction for depreciation.
Financial and business terms. 2012.