Capital improvement refers to the significant enhancement or betterment of a building or equipment, which extends its useful life or increases its productivity. The costs associated with capital improvements are added to the asset's basis and depreciated over time.
Class Life Asset Depreciation refers to the tax guidelines that determine the period over which different types of assets can be depreciated. The IRS uses these guidelines to assign a specific 'class life' to asset categories, dictating how many years over which the depreciation can be calculated.
An effort to depreciate a property based on the lives of individual assets within it, allowing for more accurate allocation of expense over time compared to composite depreciation.
A method of accelerated depreciation where a percentage rate of depreciation is applied to the undepreciated balance, rather than the original cost. It is commonly used to depreciate assets that lose value quickly early in their useful lives.
A method of calculating the depreciation of a wasting asset based on the rate at which it is being used. For example, a coal mine could be depreciated on the basis of the rate at which coal is extracted from it.
A depreciation reserve, also known as accumulated depreciation, is the total depreciation charged against all productive assets as stated on the balance sheet. It allows for realistic reduction in the value of productive assets and facilitates tax-free recovery of the original investment in assets.
Equal-Instalment Depreciation, also known as the straight-line method, is a simple and commonly used depreciation method where an asset's cost is evenly spread over its useful life.
In tax law, the assumption that an asset acquired at any point in the taxable year was placed in service halfway through the year.
The number of years over which the cost of an asset may be depreciated.
The reducing-balance method is a form of depreciation calculation that allocates a higher depreciation expense in the earlier years of an asset’s life and a lower expense in the later years.
Residual value, also referred to as disposal value or net residual value, represents the expected proceeds from the sale of an asset, net of the costs of sale, at the end of its estimated useful life.
The term 'underwater' describes a financial condition where an asset, loan, or portfolio has a value less than its associated debt or purchase price.
The Writing-Down Allowance (WDA) is a form of tax relief that allows businesses to depreciate certain types of assets to reduce taxable profits.
Written-down value (WDV) is the value of an asset for tax purposes after accounting for reduction in value below the initial cost due to its use in trade. It indicates the remaining value of the asset after appropriate capital allowances.
