Accumulated depletion definition
/What is Accumulated Depletion?
Accumulated depletion is the amount of depletion expense that has built up over time in relation to the use of a natural resource. This amount is paired with the natural resource asset on the balance sheet as a contra account. The net effect of this pairing is that a reduced amount of natural resource asset appears on the balance sheet of the reporting entity.
The amount of accumulated depletion reported by a business will increase over time, as it extracts more resources from its designated asset. Thus, as the accumulated depletion balance increases, the remaining value of the associated natural resource declines.
The typical natural resource that is associated with depletion is a mine.
Analysis of Accumulated Depletion
A business that reports a large proportion of accumulated depletion in relation to the amount of natural resources asset on its books is probably approaching the end of the useful life of the associated resources.