Depreciation - Accounting Vs Economics

Accounting Depreciation

Spreading of a cost of an asset over a period of its estimated useful life.

Economics Depreciation

A decrease in the market value of an asset as per the benefit is taken by it over the period of time. 

IFRS Definition

Depreciation is the systematic allocation of the depreciable amount of an asset over its useful life. A depreciable amount is the cost of an asset, or other amount substituted for cost, less its residual value. Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item shall be depreciated separately. The depreciation charge for each period shall be recognised in profit or loss unless it is included in the carrying amount of another asset. The depreciation method used shall reflect the pattern in which the asset’s future economic benefits are expected to be consumed by the entity.