Businesses depreciate long-term assets for both tax and accounting purposes. Generally the cost is allocated, as depreciation expense, among the periods in which the asset is expected to be used. These may be specified by law or accounting standards, which may vary by country. There are several standard methods of computing depreciation expense, including fixed percentage, straight line, and declining balance methods. 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: Depreciation is technically a method of allocation, not valuation, even though it determines the value placed on the asset in the balance sheet.
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