Asset Depreciation Range - ADR

DEFINITION of 'Asset Depreciation Range - ADR'

An elective accounting method established by the Internal Revenue Code for tangible assets placed into service after 1970. Prior to the ADR system, there were over 100 asset classes for tangible property based on the taxpayer's business and industry. Because the ADR system did not solve the problems it was intended to address, namely, disagreements between the IRS and taxpayers about accounting for the useful life, salvage value and repairs of assets, the Accelerated Cost Recovery System was introduced in 1981 to provide a less complicated way to determine depreciation.

BREAKING DOWN 'Asset Depreciation Range - ADR'

Businesses had more flexibility under the ADR system to determine the useful life of an asset, because the asset depreciation range allowed the taxpayer a 20% leeway above and below the IRS's established useful life for each asset class. Thus, if the established useful life of a desk was considered to be 10 years, the taxpayer could depreciate it over anywhere from eight to 12 years. Depreciation methods allowed by the IRS have changed several times since the ADR system; today the taxpayer must depreciate that same desk over seven or 10 years, depending on the depreciation system used.

RELATED TERMS
  1. Accumulated Depreciation

    The cumulative depreciation of an asset up to a single point ...
  2. Declining Balance Method

    A common depreciation-calculation system that involves applying ...
  3. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax ...
  4. Sponsored ADR

    An American depositary receipt (ADR) issued by a bank on behalf ...
  5. Retirement Method of Depreciation ...

    An accounting procedure in which an asset is expensed for depreciation ...
  6. American Depositary Receipt - ADR

    A negotiable certificate issued by a U.S. bank representing a ...
Related Articles
  1. Markets

    ADR Basics: What Is An ADR?

    Introduced to the financial markets in 1927, an American depositary receipt (ADR) is a stock that trades in the United States but represents a specified number of shares in a foreign corporation. ...
  2. Investing

    Introduction To American Depositary Receipts (ADRs)

    Investors should look beyond the confines of the U.S. borders to diversify and maximize returns. ADRs are one way to diversify your portfolio and help you achieve better returns when the U.S. ...
  3. Markets

    ADR Basics: Conclusion

    With globalization dissolving borders, it only makes sense that we have the ability to invest in foreign entities. Many nations who are striving to become industrialized are undervalued compared ...
  4. Investing

    An Introduction To Depreciation

    Companies make choices and assumptions in calculating depreciation, and you need to know how these affect the bottom line.
  5. Investing

    What's Salvage Value?

    Salvage value is the amount a company expects to receive from the sale of an asset at the end of that asset’s useful life. Salvage value plays a part in the depreciation calculation of an asset, ...
  6. Markets

    Most Powerful And Influential Public Companies In 3 Metrics

    There are many ways to rank the word's most powerful companies. Looking at market value, brand value or sales revenue are all methods used to rank the biggest companies in the world.
  7. Managing Wealth

    How Rental Property Depreciation Works

    It's a bit tricky, but a valuable tool to make your investment pay off.
  8. Investing

    Explaining Net Tangible Assets

    Net tangible assets is a company’s total assets subtracting both intangible assets (such as goodwill and intellectual property) and total liabilities.
  9. Investing

    Double Declining Balance Depreciation Method

    The double declining balance depreciation method counts the depreciation of a long-lived asset’s book value at double the rate of its straight-line depreciation.
  10. Markets

    How To Trade Foreign Stocks

    We weigh the major ways to trade foreign stocks for investors.
RELATED FAQS
  1. What are the different ways to calculate depreciation for tangible assets?

    Learn what depreciation is and how to calculate it using the straight line method, declining balance method, and the sum-of-the ... Read Answer >>
  2. Is depreciation only used for tangible assets?

    Learn if tangible assets can be depreciated, as well as what other assets are eligible for depreciation so you can account ... Read Answer >>
  3. What factors must a company consider before establishing an American Depository Receipt ...

    Learn which factors a foreign company must consider before establishing an American Depository Receipt, or ADR, program in ... Read Answer >>
  4. What tangible assets are depreciated?

    Learn about why tangible business assets are depreciated, what qualifies as a tangible business asset and which assets cannot ... Read Answer >>
  5. How is depreciation related to the carrying value of a tangible asset?

    Understand how depreciation is related to the carrying value of a company's tangible asset. Learn how accumulated depreciation ... Read Answer >>
  6. Why are big foreign companies considering delisting their American depositary receipts?

    American depositary receipts (ADRs) were developed to give investors an easier way to invest in foreign companies. An ADR ... Read Answer >>
Hot Definitions
  1. AAA

    The highest possible rating assigned to the bonds of an issuer by credit rating agencies. An issuer that is rated AAA has ...
  2. GBP

    The abbreviation for the British pound sterling, the official currency of the United Kingdom, the British Overseas Territories ...
  3. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  4. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
  5. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  6. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
Trading Center