Depreciation vs depletion

Depletion implies removal of an available but irreplaceable resource such as extracting coal from a Coal Mine, or oil out of an Oil Well. The process of writing off intangible assets is termed as amortization; some intangible assets like patents, copy-rights, leaseholds etc.

Depreciation vs depletion

This is the currently selected item. Video transcript You'll often hear the words depreciation and amortization used together. And what I want to do in this video is to understand a little bit better why they are similar and the slight difference between the two.

So in our previous examples, we've done depreciation. And so this is right at the end of period zero or at the beginning of period one. And what we do is we spread out this expense over the period of time that we're actually going to use the truck.

We're assuming we have a three year life of this truck.

Depreciation vs depletion

And we're just going to do what's called straight line depreciation. We're just going to take the cost of the truck and divide it by its life.

Depletion, Depreciation & Amortisation (“DD&A”) 30 Financial reporting in the oil and gas industry Financial reporting in the power and utilities industry 11 Introduction Introduction Financial reporting in the oil and gas industry 3. and. Depreciation is the accounting process of allocating the cost of tangible assets to current expense in a systematic and rational manner in those periods expected to benefit from the use of the asset. For example, tangible assets like buildings, ma. Depreciation vs Depletion Depreciation - (SEC. 34 F) There shall be allowed as a depreciation deduction a reasonable allowance for the exhaustion, wear and tear (including reasonable allowance for obsolescence) of property used in trade or business.

There's other ways to depreciate it. Maybe you could imagine that it depreciates faster in the first year, but this is the simplest type.

Depreciation, Depletion and Amortization (DD&A)

And it's actually used by a lot of companies, just straight line depreciation. We expense it in that year. So this is literally an expense. Now on our books at the end of period two, it'll be worth And then on, at least for just this truck, assuming we haven't bought a new one yet, we've completely written it off.

It is now worth zero on our books because based on what we assumed, it's not useful anymore. We kind of have to scrap this truck. Now imagine if to run our trucking business we also have to pay some type of license fee. So let me call this a license fee. And we get to use it over four years.

You're not just using the fee in that period.

Depreciation vs depletion

That fee is going to be useful over the next four years. So once again, you would put down the asset, the paid license fee or maybe the prepaid license fee depending on how you view it.

What it is:

And then you would amortize that cost, which is essentially the same thing mathematically. Now I've completely written it off and I probably have to get another license at this point. So mathematically, they're the same thing. Even philosophically, they're the same thing. The idea that instead of expensing these expenses all at once you're saying, look, they have some useful life.

Let me spread out the expense over their useful life. The difference between the two-- and you might have already kind of realized this-- is depreciation is when you have hard assets. If you have a building or a truck or some type of equipment, you would depreciate that asset.

If you have a non-hard asset or a financial asset or something that's less tangible, then you would just amortize it. This is just kind of a different word depending on how tangible the asset is.

So if it's a license fee or some other type of fee or some type of it maybe intellectual property, you would amortize the cost. If you have a truck or a building or whatever, you would depreciate it.Depreciation. For a decedent's estate, the depreciation deduction is apportioned between the estate and the heirs, legatees, and devisees on the basis of the estate's income allocable to each.

Introduction. You are in the business of farming if you cultivate, operate, or manage a farm for profit, either as owner or tenant.

A farm includes livestock, dairy, poultry, fish, fruit, and truck farms. WOA! World Population Awareness is a non-profit web publication seeking to inform people about overpopulation, unsustainability, and overconsumption; the impacts, including depletion of natural resources, water, oil, soil, fertilizers, species loss, malnutrition, poverty, displacement of people, conflict; and what can be done about it: women's advancement, education, reproductive health care.

With depreciation, amortization, and depletion all three methods are noncash expenses with no cash spent in the years they are expensed. Also, it's important to note that in some countries, such.

Book Depreciation. Book depreciation refers to the business's depreciation expense as recorded on its financial statements and the depreciation method used to calculate that expense. Compass Minerals reported net earnings of $ million, or $ per diluted share, for the quarter, compared to earnings of $ million, or $ per diluted share, in the prior-year period.

An Introduction To Depreciation