Depreciation is any method of allocating such net cost to those periods in which the organization is expected to benefit from use of the asset. This is usually done in a rational and systematic manner. The business then records depreciation expense in its financial reporting as the current period's allocation of such costs. The asset is referred to as a depreciable asset. Depreciation is technically a method of allocation, not valuation, even though it determines the value placed on the asset in the balance sheet. For example, a depreciation expense of per year for five years may be recognized for an asset costing Generally this involves four criteria:
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