Accrued Depreciation | Propertylogy

Accrued Depreciation

By on July 25, 2019

Accrued depreciation is an accounting entry on the balance sheet that is mean to indicate the decrease in value of property as time goes by.

However in reality, property tend to increase in value due to inflation and improvements.

Leasehold real estate might see a drastic drop in value as the master lease nears expiry with no sign of renewal options being available.

The result of this contrast can often be observed from a huge difference between book value caused by accrued depreciation and market value.

For example, a building purchased for $150,000 5 years ago might have a straight line depreciation of $3,000 annually. The accrued depreciation would be $15,000 to date. Giving it a current book value of $135,000.

It is sometimes also referred to as accumulated depreciation.

In appraisal works, it is often known as diminished utility as appraisers estimate the difference in the reproduction cost and current value.

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