depreciation investment & finance definition

The periodic cost assigned for the reduction in usefulness and value of a long-term tangible asset. Because firms can use several types of depreciation, the amount of depreciation recorded on corporate financial statements may or may not be a good indication of an asset's reduction in value. Depreciation not only affects the asset's value as stated on the balance sheet, it also affects the amount of reported earnings. See also Accelerated Cost Recovery System, accelerated depreciation, accumulated depreciation, recapture of depreciation, straight-line depreciation.