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.

BREAKING DOWN '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. Accelerated Depreciation

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

    1. A method of allocating the cost of a tangible asset over its ...
  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 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. Economics

    Explaining Accounting Conservatism

    Accounting conservatism is a principal that requires accounting rules be applied with high degrees of verification.
  4. Term

    What are Pension Funds?

    A pension fund is a company-sponsored fund that provides income for employees in retirement.
  5. Term

    What are Non-GAAP Earnings?

    Non-GAAP earnings are a company’s earnings that are not reported according to Generally Accepted Accounting Principles.
  6. Fundamental Analysis

    Calculating Return on Net Assets

    Return on net assets measures a company’s financial performance.
  7. Credit & Loans

    What's a Nonperforming Loan?

    A nonperforming loan is any borrowed sum where the borrower has failed to pay scheduled payments for at least 90 days.
  8. Economics

    Understanding Cost of Revenue

    The cost of revenue is the total costs a business incurs to manufacture and deliver a product or service.
  9. Economics

    Understanding Cash and Cash Equivalents

    Cash and cash equivalents are items that are either physical currency or liquid investments that can be immediately converted into cash.
  10. Economics

    Explaining Carrying Cost of Inventory

    The carrying cost of inventory is the cost a business pays for holding goods in stock.
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. What are the best ways to sell an annuity?

    The best ways to sell an annuity are to locate buyers from insurance agents or companies that specialize in connecting buyers ... Read Full Answer >>
  3. What are the best ways to use your 401(k) without a penalty?

    The best way to use your 401(k) retirement savings account is to take normal distributions after you reach retirement age. ... Read Full Answer >>
  4. How are spousal benefits calculated for Social Security?

    The amount of your Social Security spousal benefit depends on a number of factors, including your age, the maximum amount ... Read Full Answer >>
  5. How does divorce affect Social Security benefits?

    If you are eligible to receive Social Security retirement benefits on your own account, your marital status has no impact ... Read Full Answer >>
  6. Are Social Security benefits affected by marriage?

    The amount of Social Security benefit you are eligible to collect upon retirement is not affected by marriage. Your benefit ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Bubble Theory

    A school of thought that believes that the prices of assets can temporarily rise far above their true values and that these ...
  2. Stock Market Crash

    A rapid and often unanticipated drop in stock prices. A stock market crash can be the result of major catastrophic events, ...
  3. Financial Crisis

    A situation in which the value of financial institutions or assets drops rapidly. A financial crisis is often associated ...
  4. Election Period

    The period of time during which an investor who owns an extendable or retractable bond must indicate to the issuer whether ...
  5. Shanghai Stock Exchange

    The largest stock exchange in mainland China, the Shanghai Stock Exchange is a nonprofit organization run by the China Securities ...
  6. Dead Cat Bounce

    A temporary recovery from a prolonged decline or bear market, followed by the continuation of the downtrend. A dead cat bounce ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!