Depreciation, Depletion and Amortization

Depreciation
The process of allocating the cost of a long-lived tangible asset over its useful life.

Depletion
The allocation of the value of a natural resource {also called wasting assets- crude oil, ore, etc.} as it is exploited. Use unit-of product for depreication.

Amortization
· Allocation of the cost of intangible assets over their life.
· Most firms use SL method
· Goodwill and other intangible assets with indefinite lives are not amortized but subject to impairment test at least annually. If the asset is impaired, the expense is recognized in the income statement.