Business Definition for: economic depreciation
economic depreciation
in real estate, loss of value from all causes outside the property itself. For example, an expensive private home may drop in value when an industrial plant is built nearby. This is a form of economic depreciation that must be considered in the
appraisal
of the property.
See also
depreciation
Related Terms:
- 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.
- 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.
Referring Terms:
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