Depreciation is the systematic allocation of a tangible asset's depreciable amount over its useful life. It spreads accounting cost across the periods using the asset rather than recording the full cost only when cash is paid, and it does not measure the asset's current market-price decline.
For property, plant, and equipment, the depreciable amount is generally cost less residual value. The useful life and depreciation method should reflect expected consumption of the asset's economic benefits and must be reviewed when estimates change.
Depreciation reduces reported profit and the asset's carrying amount but is not itself a current-period cash payment. It still matters economically because worn-out assets may require future replacement expenditure.
This page explains the shared concept. National legal effects may differ. Check official records before acting.
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