Depreciation
The allocation of a tangible asset’s depreciable cost over its useful life. It reflects an accounting allocation, not necessarily physical wear alone.
Depreciation at Hanil Widget Works
Hanil’s profile lists depreciation of 0.02m for the year, a small fraction of its 100.0m in revenue.
| first | 0.02m |
|---|---|
| ÷ | 100.0m |
| = | 0.02% |
Related concept: amortization
Amortization applies a related cost-allocation concept to finite-lived intangible assets. It is not a strict synonym for depreciation.
Shayne Fitz-Coy’s definition of Depreciation
Depreciation gets added back because no money left the business that year. Nobody wrote a check to a depreciation vendor.
The money left earlier, when the boats were repaired and the ships were fixed. That is why the add-back comes with capex taken back out.
Terms Related to Depreciation
EBITDA · Income statement · Operating income · Cost segregation · Goodwill · All of the glossary