Fully Depreciated Asset

AAA

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.

INVESTOPEDIA EXPLAINS '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. Business Asset

    A piece of property or equipment purchased exclusively or primarily ...
  2. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax ...
  3. General Depreciation System - GDS

    The most commonly used modified accelerated cost recovery system ...
  4. Intangible Asset

    An asset that is not physical in nature. Corporate intellectual ...
  5. Tangible Asset

    Assets that have a physical form. Tangible assets include both ...
  6. Depreciation

    1. A method of allocating the cost of a tangible asset over its ...
Related Articles
  1. An Introduction To Depreciation
    Active Trading

    An Introduction To Depreciation

  2. A Clear Look At EBITDA
    Markets

    A Clear Look At EBITDA

  3. Depreciation: Straight-Line Vs. Double-Declining ...
    Forex Education

    Depreciation: Straight-Line Vs. Double-Declining ...

  4. 5 Things To Know About Asset Allocation
    Investing Basics

    5 Things To Know About Asset Allocation

Hot Definitions
  1. Conduit Issuer

    An organization, usually a government agency, that issues municipal securities to raise capital for revenue-generating projects ...
  2. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  3. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  4. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  5. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  6. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
Trading Center