DEFINITION of 'Fully Depreciated Asset'

A property, plant, or piece of equipment which, for accounting purposes, is worth only its salvage value. Whenever an asset is capitalized, its cost is depreciated over several years according to a depreciation schedule. Theoretically, this provides a more accurate estimate of the true expenses of maintaining the company's operations each year.

BREAKING DOWN 'Fully Depreciated Asset'

In reality, it is difficult to predict the useful life of an asset, so depreciation expenses represents only a rough estimate of the true amount of an asset used up each year. Conservative accounting practices dictate that, when in doubt, it is more prudent to use a faster depreciation schedule so that expenses are recognized earlier. In that way, if the asset does not live out the expected life, the company does not incur an unexpected accounting loss. Due to these factors, it is not unusual for a fully depreciated asset to still be in good working order and producing value for the firm.

RELATED TERMS
  1. Accumulated Depreciation

    The cumulative depreciation of an asset up to a single point ...
  2. Depreciation

    1. A method of allocating the cost of a tangible asset over its ...
  3. Salvage Value

    The estimated value that an asset will realize upon its sale ...
  4. Retirement Method of Depreciation ...

    An accounting procedure in which an asset is expensed for depreciation ...
  5. Depreciable Property

    Any type of asset that is eligible for depreciation treatment. ...
  6. Declining Balance Method

    A common depreciation-calculation system that involves applying ...
Related Articles
  1. Investing

    An Introduction To Depreciation

    Companies make choices and assumptions in calculating depreciation, and you need to know how these affect the bottom line.
  2. 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, ...
  3. Investing

    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. Investing

    Depreciation: Straight-Line Vs. Double-Declining Methods

    Appreciate the different methods used to describe how book value is "used up".
  5. Financial Advisor

    How Does Depreciation Reduce My Tax Bill?

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

    How Rental Property Depreciation Works

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

    Understanding Accumulated Depreciation

    Depreciation is a rough approximation, in dollar terms, of the wear and tear on an asset. So the accumulated depreciation is the aggregate of the wear and tear on the asset from all prior time ...
  8. Trading

    Understanding Currency Depreciation

    Currency depreciation occurs when a currency’s value falls in comparison to other currencies.
  9. Investing

    Understanding Capital Assets

    A capital asset is one that a company plans on owning for more than one year, and uses in the production of revenue.
  10. Investing

    Explaining Capitalized Cost

    A capitalized cost is an expense associated with a fixed asset that is added to the basis of that asset and expensed over its depreciable life.
RELATED FAQS
  1. 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 >>
  2. 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 >>
  3. 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 >>
  4. How is salvage value used in depreciation calculations?

    Learn how an asset's salvage value is subtracted from its initial cost to determine the amount by which an asset is depreciated ... Read Answer >>
  5. How does accumulated depreciation affect net income?

    Learn why accumulated depreciation does not directly affect a company's net income; understand where a company accounts for ... Read Answer >>
  6. What is the tax impact of calculating depreciation?

    Understand the tax implications of a company's depreciation. Learn how differences in accounting methods change the amount ... Read Answer >>
Hot Definitions
  1. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
  2. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
  3. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  4. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
  5. Liquidity Event

    An event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an ...
  6. Job Market

    A market in which employers search for employees and employees search for jobs. The job market is not a physical place as ...
Trading Center