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.

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