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. Alternative Depreciation System ...

    A depreciation schedule with a straight-line recovery period ...
  2. Depreciation

    1. A method of allocating the cost of a tangible asset over its ...
  3. Retirement Method of Depreciation ...

    An accounting procedure in which an asset is expensed for depreciation ...
  4. Sponsored ADR

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

    The cumulative depreciation of an asset up to a single point ...
  6. American Depositary Receipt - ADR

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

    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 Basics

    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. Term

    Explaining the Declining Balance Method

    The declining balance method is a system for calculating an asset’s rate of depreciation against its non-depreciated balance.
  4. Active Trading

    An Introduction To Depreciation

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

    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 ...
  6. Investing

    How Does Depreciation Reduce My Tax Bill?

    How the depreciation tax rule can assist real estate investors.
  7. Investing

    Introduction To American Depository Receipts ADRs

    ADRs can open up a whole new world for investors. Find out what they are and how they work.
  8. Economics

    ADR Basics: Determining Price

    Now that you've learned how an ADR is established and sold to the public, let's delve a little deeper. In this section, we'll examine how the price of an ADR is determined. Let's use an example ...
  9. Economics

    ADR Basics: Risks

    There are several factors that determine the value of the ADR beyond the performance of the company. Analyzing these foreign companies involves further scrutiny than merely looking at the fundamentals. ...
  10. Investing

    How Rental Property Depreciation Works

    It's a bit tricky, but a valuable tool to make your investment pay off.
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. 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 >>
  3. How are American Depository Receipts (ADRs) exchanged?

    Learn specifics about American depositary receipts, including how they are exchanged and some of their advantages and disadvantages. Read Answer >>
  4. How are American Depository Receipts (ADRs) priced?

    Understand what American depositary receipts are and how they work, including how the price of ADRs is determined by the ... Read Answer >>
  5. 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 >>
  6. What is the relationship between accumulated depreciation and depreciation expense?

    Understand the relationship between accumulated depreciation and depreciation expense. Learn how each one is accounted for ... Read Answer >>
Hot Definitions
  1. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  2. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  3. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  4. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  5. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  6. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
Trading Center