Accounting Research BULLETINS
Issued by the Committee on Accounting Procedure,
American Institute of Accountants, 13 East 41 st Street, New York 17, N. Y. Copyright 1944 by American Institute of Accountants
Committee on Terminology
Like earlier reports, this report of the committee on terminology is published in the form of an accounting research bulletin for the information of members of the Institute and others.
REPORT OF THE COMMITTEE ON TERMINOLOGY
To THE COUNCIL OF THE
AMERICAN INSTITUTE OF ACCOUNTANTS:
The definition of depreciation suggested in the committee's report of October 18, 1943, was approved by the committee on accounting procedure and the report was circulated to the membership of the Institute as Accounting Research Bulletin No. 20. It has elicited considerable comment, and one suggestion has been made to which effect might perhaps advantageously be given in a revision of the definition. It is that a specific reference should be made to salvage, and the point could be covered by inserting the words "less salvage (if any)" after the words "tangible capital assets" in the definition. As amplified the definition would read:
Depreciation accounting is a system of accounting which aims to dis-tribute the cost or other basic value of tangible capital assets, less salvage (if any), over the estimated useful life of the unit (which may be a group of assets) in a systematic and rational manner. It is a process of allocation, not of valuation. Depreciation for the year is the portion of the total charge under such a system that is allocated to the year. Although the allocation may properly take into account occurrences during the year, it is not intended to be a measurement of the effect of all such occurrences.