Depreciation

From Investment Wiki

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. The difference between the current market value of an improvement and its replacement or reproduction cost. It is the loss in value from any cause, but most often due to deterioration or obsolescence. Depreciation is broken down into three major types: Physical Deterioration; Functional Obsolescence, and; External Obsolescence.