Wasting Asset

DEFINITION of 'Wasting Asset'

An item that irreversibly declines in value, as a function of time. Wasting assets include vehicles, machinery and other fixed assets. Accountants attempt to quantify the amount that assets decrease in value over time, by assigning depreciation schedules to wasting assets, therefore, recognizing the decrease in value each year.

BREAKING DOWN 'Wasting Asset'

In investing, options are the most common type of wasting asset. An option's value has two components: a time value and an intrinsic value. As the option's expiration date nears, the time value of the option gradually declines to zero. At expiration, an option is worth only its intrinsic value. Nonetheless, wasting assets are usually of a physical nature and experience price erosions as time passes.

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RELATED FAQS
  1. What is the difference between carrying value and market value?

    Understand the difference between carrying value and market value. Learn when a company uses carrying value to value an asset ... Read Answer >>
  2. What role does intrinsic value play in call options?

    Understand why the concept of intrinsic value is important for options traders and how they can use it to estimate what a ... Read Answer >>
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