Depreciation

Depreciation
1. An expense recorded to reduce the value of a long-term tangible asset. Since it is a non-cash expense, it increases free cash flow while decreasing reported earnings. 2. A decrease in the value of a particular currency relative to other currencies.
1. Depreciation is used in accounting to try and match the expense of an asset to the income that the asset helps the company earn. For example, if a company bought a piece of equipment for $1 million and expected it would have a useful life of 10 years, it would be depreciated over the 10 years. Every accounting year the company would expense $100,000 (assuming straight line depreciation), and this would be matched with the money that the equipment helps to make each year. 2. Examples of currency depreciation are the infamous Russian rouble crisis, where the rouble lost 25% of its value in one day.
The Hidden Entitlements - A very interesting article that sheds some light on how accelerated depreciation came to be. Hint: it involves Nixon. Appreciating Depreciation - Companies make choices and assumptions in calculating depreciation, and you need to know how these affect the bottom line.