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Generally this involves four criteria: The business then records depreciation expense in its financial reporting as the current period's allocation of such costs. In accountancy, depreciation refers to two aspects of the same concept: There are several standard methods of computing depreciation expense, including fixed percentage, straight line, and declining balance methods.

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Depreciation expense generally begins when the asset is placed in service. Generally the cost is allocated, as depreciation expense, among the periods in which the asset is expected to be used. This expense is recognized by businesses for financial reporting and tax purposes.

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These may be specified by law or accounting standards, which may vary by country. The asset is referred to as a depreciable asset. The former affects the balance sheet of a business or entity, and the latter affects the net income that they report.

Businesses depreciate long-term assets for both tax and accounting purposes.

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