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Business Definition for: capital recovery allowance
Dictionary of Accounting Terms
capital recovery allowance

in taxation, term describing a cost recovery of capital. An example is depreciation expense taken over the expected life of the capital asset, although an accelerated cost recovery system (ACRS) ignores such time-honored concepts as useful life and salvage value. A recovery allowance may also take the form of depreciation with shorter useful lives and immediate expensing (e.g., research and development).

See also depreciation
Related Terms:
depreciation

  1. spreading out of the original cost over the estimated life of the fixed assets such as plant and equipment. Depreciation reduces taxable income. Among the most commonly used depreciation methods are straight-line depreciationand accelerated depreciationsuch as the sum-of-the-years'-digits (SYD) methodand double declining balance method.
  2. decline in economic potential of limited life assets originating from wear and tear, natural deterioration through interaction of the elements,and technical obsolescence. To some extent, maintenance (lubrication, adjustments, parts replacement, and cleaning) may partially arrest or offset wear and deterioration.

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