Depreciation definition

Depreciation is the term given to the decline in an asset’s value, either due to market conditions or other factors like wear and tear. It is the opposite of appreciation.

When currencies and other financial assets devalue, it is often due to market conditions. The Australian dollar, for instance, may depreciate significantly because of a perceived weakness in the Australian economy. This form of depreciation can be hard to predict with absolute certainty.

Other assets, however, are known to depreciate over time as their usefulness or reliability declines. Machinery bought by a company could be a depreciating asset.

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