ACCOUNTING GLOSSARY
Depreciation
Depreciation
Allocation of a tangible asset's cost over its estimated useful life.
What does Depreciation mean?
Allocation of a tangible asset's cost over its estimated useful life. Professionals may calculate, document or apply this concept differently depending on the transaction, accounting method, lender policy and governing documents. Borrowers should confirm the precise definition used in any term sheet or agreement.
Depreciation in context
A company records annual depreciation on a financed truck.
Why it matters in financing
Depreciation can influence how a lender, investor or advisor evaluates risk, pricing, structure, repayment capacity or transaction economics. It should be considered together with the complete financial picture rather than used alone.
Related accounting terms
Educational information only. This definition is general, may not match a particular lender or contract, and is not financial, accounting, tax or legal advice.