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...observed amounts (including appreciation)."
Thus spoke Miller Bahnson in the Oct. 25-Nov. 7, 2004, issue of Accounting Today (page 14). While the eminent professors probably know this, let's recap the fundamentals of depreciation, as shown in the authoritative Wiley GAAP Guide.
The definition of depreciation is given as: "The periodic charge to income that results from a systematic and rational allocation of cost over the life of the asset."
The GAAP Guide goes on to explain: "The costs of fixed assets (less residual or salvage value) are allocated to the periods they benefit through depreciation ... the determination of useful life must take a number of factors into consideration, including technological change, normal deterioration, and actual physical usage. The method of depreciation is determined as a function of time (e.g., technological change or normal deterioration) or...
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