when people talk about depreciation it is often in reference to accounting depreciation accounting depreciation is the process of allocating the cost of an asset over the course of its useful life so as to align its expenses with revenue generation businesses also create accounting depreciation schedules with tax benefits in mind since depreciation on assets is deductible as a business expense in accordance with the internal revenue service s irs rules 
most businesses depreciate an asset to 0 in book value because they believe the asset s value and expenses have been fully matched with the revenue it generates over its expected useful life companies may choose to hold some book value of a depreciated asset after it has been fully depreciated the book value of an asset and the market value of an asset are usually very different the economic value or market value of an asset may not be reported on financial statements but it is the value a company could potentially get if they chose to make an asset sale depreciation vs appreciationin general both economic depreciation and economic appreciation can affect the market value of an asset in some instances one appraisal to another may show an increase in value this would be the result of negative depreciation or positive appreciation during the credit crisis and housing market collapse of 2008 the combination of subprime loans requiring low or no down payments with the dramatic drop in housing values resulted in a significant amount of u s homeowners owing more money on their home than it was actually worth due to economic depreciation during the housing crisis of 2008 homeowners in the hardest hit areas such as las vegas saw the value of their homes depreciate by as much as 60 hypothetically economic influences can also lead to increases in value or economic appreciation following the height of the 2008 financial crisis regulators and the central bank took steps to improve economic conditions for the housing market that resulted in a housing market rebound and significant economic appreciation in real estate values from one appraisal to the next valuing assetsall types of assets are subject to the risks of economic depreciation and economic appreciation companies and investors may need to analyze and follow these effects differently a company may not always be concerned with how economic depreciation is affecting the market value of its tangible assets however companies and investors will be concerned with how market influences are affecting highly liquid assets like stocks bonds and money market accounts companies will follow more closely the depreciation and appreciation of assets that it marks to market on its books regularly since that has a greater impact on its overall performance investors certainly follow the economic depreciation and appreciation of assets in their portfolio regularly since it can have a big effect on their net worth from one day to the next for asset owners liquidity can also be a factor in analyzing economic depreciation and appreciation real estate assets may see a larger increase or decrease in value from year to year due to economic effects investors may view the economic depreciation or appreciation of their more liquid assets differently since economic factors can influence values from one day to the next 