depreciation
Definitions (2)
1. A noncash expense that reduces the value of an asset as a result of wear and tear, age, or obsolescence. Most assets lose their value over time (in other words, they depreciate), and must be replaced once the end of their useful life is reached. There are several accounting methods that are used in order to write off an asset's depreciation cost over the period of its useful life. Because it is a non-cash expense, depreciation lowers the company's reported earnings while increasing free cash flow.
2. A decline in the value of a given currency in comparison with other currencies. For instance, if the U.S. dollar depreciates against the Euro, buyers would have to pay more dollars in order to obtain the original amount of euros before depreciation occurred.
Use depreciation in a sentence
“ The depreciation of value for the used truck does not make it a great investment and would more than likely not garner profit. ”
“ The depreciation of the inventory was complete according to the book value however the asset still was functioning in the warehouse. ”
“ The depreciation was not just a natural consequence of time, the house lost value because the prior residents threw wild parties that often resulted in significant property damage. ”
Related Terms
Mentioned in these terms
- replacement cost depreciation
- double-declining balance depreciation method
- depreciation tax shield
- annuity method of depreciation
- depreciation recapture
- asset depreciation risk
- earnings before interest, depreciation, amortization and exploration (EBIDAX)
- Earnings Before Interest, Taxes, Depreciation, Amortization and Rent
- operating income before depreciation and amortization
- currency depreciation
