Accumulated Depreciation

Category

Balance Sheet

Units

Currency

US-GAAP elements

AccumulatedDepreciationDepletionAndAmortizationPropertyPlantAndEquipment

Reference

Regulation S-X Rule 5-02.14 (Accumulated depreciation, depletion, and amortization of property, plant and equipment); ASC 360

Source

Reported in SEC EDGAR filings (US-GAAP XBRL taxonomy)

Accumulated depreciation is the total depreciation a company has charged against its property, plant, and equipment since those assets were placed in service, net of amounts removed when assets were sold or retired. It is a contra-asset: it is subtracted from the original cost of PP&E to give net PP&E, the carrying amount shown on the balance sheet.

The figure grows each period by that period's depreciation expense and falls when fully or partly depreciated assets leave the books. For natural-resource companies it usually also includes depletion, and it can include amortization of leasehold improvements and finance-lease assets.

Regulation S-X Rule 5-02.14 requires the accumulated depreciation, depletion, and amortization of property, plant, and equipment to be disclosed separately, either on the face of the balance sheet or in a note. In XBRL filings the balance is tagged AccumulatedDepreciationDepletionAndAmortizationPropertyPlantAndEquipment. It links two other lines: PP&E gross, which is original cost, and PP&E net, which is cost less this amount.

Depreciation spreads the cost of a long-lived asset over its useful life under ASC 360, using a method such as straight-line or an accelerated schedule. Land is not depreciated, so it never contributes to the balance. Impairment write-downs are sometimes recorded here and sometimes as a direct reduction of cost, depending on the company, so the figure is not a pure measure of wear and tear. Amortization of intangible assets is tracked separately under Rule 5-02.16.

Analysts use accumulated depreciation to gauge how old a company's asset base is. Dividing it by gross PP&E gives the share of the asset base that has already been depreciated; a rising ratio suggests aging plant that may need heavy capital spending soon. Dividing it by annual depreciation expense gives a rough estimate of the average age of the assets in years. These comparisons work best within one company over time, since useful-life assumptions differ widely across companies and industries.