Definition: Commercial depreciation

Category: National accounts

According to accounting conventions depreciation is the distribution of the gross value of capital goods over the expected medium lifetime. This medium lifetime is defined for specific types of capital goods, not for individual capital goods as in the case of retirements. The averages are fixed according to tax regulations or regulations for commercial balance sheets. Depreciation therefore takes the risk of an early obsolescence of the capital goods into account. As in the case of capital consumption, retirements before the end of the expected lifetime add to depreciation by the actual net value of the capital goods.