Retirement Method of Depreciation

AAA

DEFINITION of 'Retirement Method of Depreciation '

An accounting procedure in which an asset is expensed for depreciation purposes only when it is removed from service instead of allocating its costs across the useful life of the asset. The depreciation expense must be reduced by the asset's salvage value, if any. Public utilities and railroads are the main types of businesses that might use this type of depreciation.

INVESTOPEDIA EXPLAINS 'Retirement Method of Depreciation '

The purpose of the retirement method of depreciation is to simplify accounting and recordkeeping for companies that own many similar assets that individually are low in value but together represent a significant expense. An electric company might use the retirement method of depreciation to account for the electric meters that are installed on the sides of residents' homes, for example.



RELATED TERMS
  1. Appraisal Method Of Depreciation

    A form of depreciation calculation that is based upon appraisal ...
  2. Depreciation

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

    Any method of depreciation used for accounting or income tax ...
  4. Group Depreciation

    A method of calculating depreciation by amalgamating assets into ...
  5. Straight Line Basis

    A method of computing amortization (depreciation) by dividing ...
  6. Book Value

    1. The value at which an asset is carried on a balance sheet. ...
RELATED FAQS
  1. What is the difference between amortization and depreciation?

    Because very few assets last forever, one of the main principles of accrual accounting requires that an asset's cost be proportionally ... Read Full Answer >>
  2. How are contingent liabilities reflected on a balance sheet

    Contingent liabilities need to pass two thresholds before they can be reported in the financial statements. First, it must ... Read Full Answer >>
  3. How do businesses determine if an asset may be impaired?

    In the United States, assets are considered impaired when net carrying value (book value) exceeds expected future cash flows. ... Read Full Answer >>
  4. How can I set up an accrual accounting system for a small business?

    First, determine whether accrual accounting makes the most sense practically and financially. If the small business is also ... Read Full Answer >>
  5. Why is work in progress (WIP) considered a current asset in accounting?

    Accountants consider work in progress (WIP) to be a current asset because it is a type of inventory asset. Accountants consider ... Read Full Answer >>
  6. What are some ways a company can improve on its Return on Capital Employed (ROCE)?

    Options available to a company seeking to improve on its return on capital employed (ROCE) ratio include reducing costs, ... Read Full Answer >>
Related Articles
  1. 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.
  2. Forex Education

    Depreciation: Straight-Line Vs. Double-Declining Methods

    Appreciate the different methods used to describe how book value is "used up".
  3. Fundamental Analysis

    What is Quantitative Analysis?

    Quantitative analysis refers to the use of mathematical computations to analyze markets and investments.
  4. Economics

    Explaining Residual Value

    Residual value is a measurement of how much a fixed asset is worth at the end of its lease, or at the end of its useful life.
  5. Economics

    What is the Cash Ratio?

    The cash ratio is the ratio of a company's total cash and cash equivalents to its current liabilities.
  6. Retirement

    How Much Money Do You Need To Retire In Hawaii?

    The Aloha State remains an idyllic place to retire, but at what cost? From rent to cereal to gasoline, we look at the hidden costs of living in paradise.
  7. Fundamental Analysis

    Why Last In First Out Is Banned Under IFRS

    We explain why Last-In-First-Out is banned under IFRS
  8. Retirement

    Find The Top Retirement Cities In Australia

    Australia has some of the world's most livable cities. Did we mention the beaches?
  9. Retirement

    Retire In Vietnam With $200,000 Of Savings?

    An excellent retirement "buy" because English is spoken widely, the cost of living is compellingly low, and Americans are generally welcome.
  10. Economics

    Understanding Carrying Value

    Carrying value is the value of an asset as listed on a company’s balance sheet. Carrying value is the same as book value.

You May Also Like

Hot Definitions
  1. Fiduciary

    1. A person legally appointed and authorized to hold assets in trust for another person. The fiduciary manages the assets ...
  2. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  3. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  4. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
  5. Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. ...
Trading Center