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. Bonus Depreciation

    A bonus depreciation is a tax relief that allows a business to ...
  2. Alternative Depreciation System ...

    Alternative Depreciation System is a depreciation schedule with ...
  3. Salvage Value

    The estimated value that an asset will realize upon its sale ...
  4. Economic Depreciation

    A measure of the decrease in value of an asset over a specific ...
  5. Unit of Production Method

    The unit of production method calculates depreciation when the ...
  6. Net Investment

    Net investment is the amount spent by a company or an economy ...
Related Articles
  1. Taxes

    Recoverable Depreciation: How it Works

    Recoverable depreciation is a concept used in many insurance policies and claims.
  2. Investing

    Depreciation: Straight-Line Vs. Double-Declining Methods

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

    Top Economic Factors That Depreciate The $US

    A variety of factors contribute to currency depreciation, including monetary policy, inflation, demand for currency, economic growth and export prices.
  4. 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.
  5. Insights

    An Introduction to Dark Pools

    Dark pools are an ominous-sounding term for private exchanges or forums for trading securities; unlike stock exchanges, dark pools are not accessible by the investing public.
  6. Investing

    Should You Wade Into The Dark Pools Of Liquidity?

    Dark pools of liquidity allow big investors to trade away from the public eye. They limit market impact but may leave small investors in the cold.
  7. Investing

    Asset Turnover Ratio

    Investopedia explains: The asset turnover ratio is a measure of a company's ability to use its assets to generate sales or revenue, and is a calculation of the amount of sales or revenue generated ...
  8. Taxes

    5 Key Tax Law Changes Impacting Businesses

    The Tax Cuts and Jobs Act impacts businesses in a number of ways.
  9. Personal Finance

    Understanding The Difference Between Spending And Investing

    Learn more about the difference between investment and spending, and why it is an important distinction to make.
RELATED FAQS
  1. What is the relationship between accumulated depreciation and depreciation expense?

    Understand the relationship between accumulated depreciation and depreciation expense. Learn how each one is accounted for ... Read Answer >>
  2. 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 >>
  3. 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 >>
  4. 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 >>
  5. What are the different ways to calculate depreciation?

    Read about some of the different allowable methods of calculating depreciation expenses as allowed by generally accepted ... Read Answer >>
Hot Definitions
  1. Capital Asset Pricing Model - CAPM

    Capital Asset Pricing Model (CAPM) is a model that describes the relationship between risk and expected return and that is ...
  2. Return On Equity - ROE

    The profitability returned in direct relation to shareholders' investments is called the return on equity.
  3. Working Capital

    Working capital, also known as net working capital is a measure of a company's liquidity and operational efficiency.
  4. Bond

    A bond is a fixed income investment in which an investor loans money to an entity (corporate or governmental) that borrows ...
  5. Compound Annual Growth Rate - CAGR

    The Compound Annual Growth Rate (CAGR) is the mean annual growth rate of an investment over a specified period of time longer ...
  6. Net Present Value - NPV

    Net Present Value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows ...
Trading Center