What is 'Group Depreciation'

Group depreciation is a combines similar fixed assets into a pool with a common cost base for calculating depreciation on financial statements. The assets grouped together should be similar in the way they function, or each asset should be small enough that it is not considered material on its own. Because modern accounting software easily records depreciation for individual assets, the use of group depreciation has become less common.

BREAKING DOWN 'Group Depreciation'

Group depreciation is also known as "composite depreciation." By pooling assets that are similar in nature, such as all of a company's delivery trucks that travel about the same distance every year, a company can simplify its depreciation calculation and save time and expense for accounting and auditing tasks. However, before deciding to pool assets into one group, it is important to consider how each asset will be depreciated individually, (referred to as unit depreciation) and whether it makes sense to group this asset with any others. In general, group depreciation is meant to be used for multiple smaller items of lower cost. However, larger more expensive items including buildings may be pooled for group depreciation purposes.

RELATED TERMS
  1. Fully Depreciated Asset

    A fully depreciated asset is a property, plant or piece of equipment ...
  2. Depreciation

    Depreciation is an accounting method of allocating the cost of ...
  3. Double Declining Balance Depreciation ...

    The double declining balance depreciation method is an accelerated ...
  4. Declining Balance Method

    By using the declining balance method a company reports larger ...
  5. Useful Life

    The useful life of an asset is an estimate of the number of years ...
  6. Depreciation Recapture

    Depreciation recapture is the gain received from the sale of ...
Related Articles
  1. Investing

    How Depreciation Works on a Rental Property

    One of the advantages of owning rental real estate is the depreciation tax deduction.
  2. Financial Advisor

    How Does Depreciation Reduce My Tax Bill?

    How the depreciation tax rule can assist real estate investors.
  3. Managing Wealth

    Cars That Depreciate In Value The Most

    You can't avoid depreciation on your car, but you can avoid certain models that depreciate in value a lot.
  4. Tech

    How Do Cryptocurrency Mining Pools Work?

    Here's how cryptocurrency mining pools work.
  5. Investing

    Book Value: How Reliable Is It For Investors?

    In theory, a low P/B ratio means you have a cushion against poor performance. In practice, it is much less certain.
  6. Investing

    How To Analyze Real Estate Investment Trusts

    REITs are much like dividend-paying companies, but analyzing them requires consideration of the accounting treatment of property.
  7. Trading

    Profiting From a Weak U.S. Dollar

    Learn how to allocate your investments when the U.S. dollar is down.
  8. Personal Finance

    What to know for an investment banking interview

    Find out what you need to know and how to prepare for an investment banking interview.
  9. Personal Finance

    Wheels Of A Future Fortune

    Buy a quality car without driving your expenses through the roof.
RELATED FAQS
  1. 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 >>
  2. How does depreciation affect cash flow?

    Depreciation is a non-cash accounting charge doesn't directly affect cash flow, but there are certain tax situations whereby ... Read Answer >>
  3. When should I use depreciation expense instead of accumulated depreciation?

    Distinguish differences between depreciation expense, which is reported on the income statement, and accumulated depreciation ... 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. 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 >>
  6. How do I calculate fixed asset depreciation using Excel?

    Learn what depreciation is and how to use Excel to calculate depreciation for fixed assets with the straight line and sum ... Read Answer >>
Trading Center