Depreciable asset definition
/What is a Depreciable Asset?
A depreciable asset is property that provides an economic benefit for more than one reporting period. As long as this asset exceeds a firm’s capitalization limit, it is recorded as a fixed asset in the organization’s accounting records. It is then depreciated over its useful life, which gradually reduces its book value over the period when it is presumed to be providing an economic benefit to the business.
What is the Depreciation Period for a Depreciable Asset?
The time period over which an asset is depreciated depends on its classification. For example, a purchase classified as a vehicle might be depreciated over five years, while a purchase classified as furniture might instead be depreciated over seven years. Buildings have much longer depreciation periods, typically in the range of 20 to 30 years. Land is not depreciated at all, since it is considered to have an infinite lifespan.
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Examples of Depreciable Assets
Examples of the classifications of assets used to record depreciable assets are buildings, computers and software, furniture and fixtures, machinery, and vehicles.
Presentation of Depreciable Assets
Depreciable assets are usually presented on the balance sheet within the fixed assets line item. It is paired with and offset by the accumulated depreciation line item, resulting in a net fixed assets amount. Fixed assets are considered to be long-term assets, so the presentation is after all current assets on the balance sheet (typically following the inventory line item). An example of this presentation appears in the following exhibit, which shows the fixed assets section of a balance sheet.
