Asset depreciation can affect the budgets for both IT managers and the entire enterprise. Choosing appropriate depreciation schedules and methods help IT plan purchases over the long term and align IT with the enterprise's strategic priorities.
Definition of Depreciation
Depreciation is an accounting term which defines the devaluation of an asset over a fixed and pre-defined timeframe, usually longer than one year. Purchases that are used up in less than one year are usually not depreciated and are considered expenses. Management refers the right to determine three attributes in depreciation:
- The method of depreciation (i.e. the type).
- The length of time used to depreciate (i.e. the schedule).
- The salvage (scrap) value of the asset, which may be set to any value.