Return on Software: Maximizing the Return on Your Software Investment

Introduction to Depreciation

The word depreciation has two different meanings in business decisions. First, it refers to how an asset will lose value over time due to effects such as wear and tear. This will be called actual depreciation. Second, it refers to how the organization accounts for that loss in value. This will be called depreciation accounting. Depreciation accounting is an important factor in decision analyses that need to accurately reflect the effects of income taxes. Income taxes are discussed in more detail in Chapters 16 and 17.

It's important to understand that actual depreciation (the real loss in value) is rarely the same as depreciation accounting (how the loss is accounted for by the organization). Actual depreciation is ...