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One such cost is the cost of assets used but not immediately consumed in the activity.

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In accountancy, depreciation refers to two aspects of the same concept: The asset is referred to as a depreciable asset. Depreciation is any method of allocating such net cost to those periods in which the organization is expected to benefit from use of the asset. The business then records depreciation expense in its financial reporting as the current period's allocation of such costs.

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Generally the cost is allocated, as depreciation expense, among the periods in which the asset is expected to be used. This is usually done in a rational and systematic manner.

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This expense is recognized by businesses for financial reporting and tax purposes. Depreciation is technically a method of allocation, not valuation,[3] even though it determines the value placed on the asset in the balance sheet.

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If an asset is expected to produce a benefit in future periods, some of these costs must be deferred rather than treated as a current expense. These may be specified by law or accounting standards, which may vary by country.

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