Duhaime's Law Dictionary


Depreciation Definition:

An accounting procedure in which the cost or other recorded value of a fixed asset less estimated residual value (if any) is distributed over its estimated useful life in a systematic and rational manner.

Related Terms: Straight-line Depreciation

In McDonald's Restaurants, Justice Bauman (later, chief justice) of the British Columbia Supreme Court adopted these words at ¶199:

"[D]epreciation (is) an accounting procedure in which the cost or other recorded value of a fixed asset less estimated residual value (if any) is distributed over its estimated useful life in a systematic and rational manner. It is a process of allocation, not valuation."

In Maher v Canada, Justice Pierre Blais, then justice of the Federal Court of Canada and, later, Chief Justice of the Federeal Court of Appeal added, at ¶122-123:

"[I]t is fallacious to assume that an asset can be so well maintained that it will remain in as good as new condition indefinitely. Depreciation begins from the moment of its first use and continues not withstanding maintenance.... It is thus accepted that depreciation should be applied for each piece of property.

"The factors in calculating depreciation are: the time lapsed in life expectancy; the structural and operational condition; the remaining life expectancy, considering its present condition; physical deterioration; (and) operational and economic obsolescence."

REFERENCES:

  • Maher v Canada, 166 F.T.R. 1 (Federal Court of Canada — Trial Division, 1999)
  • McDonald's Restaurants of Canada Ltd. v. British Columbia, 25 R.P.R. (3d) 214 (1999)

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