Depreciation

• Depreciation is intended to represent the decrease in an asset's value over time as it is used and is done to comply with the accounting requirement that costs be recorded in the same time period as the benefits their occurrence helped produce. Depreciation can happen due to a number of causes including obsolescence and wear and tear.
  
  

Determining Fair Value

• Inherited properties should be accounted for in regards to depreciation as though newly acquired used assets. In other words, although the assets have already experienced depreciation, the inheritor has acquired them in their present state and therefore records them at their present fair value on the accounts. Fair value can be determined through examining details of similar assets sold on the open market.
  
  

Recalculating Useful Lifespan and Residual Value

• Before depreciation expense in each period can be calculated for the newly acquired asset, it is necessary to reassess its useful lifespan and residual value upon disposal. Useful lifespan can be carried over by simply deducting the portion of the original estimate that has already passed while residual value can be carried over as it is. Or in situations where a fair value assessment has been done, it might be more accurate to produce new estimates of both parameters using the same measures as determining fair value.
  
  

Caculating Depreciation of Inherited Properties

• The actual process of calculating depreciation expense per period for used assets is the same as doing so for new assets. The depreciable value is calculated by subtracting residual value from its fair value as listed on the accounts. Straight-line method allocates this depreciable value in equal portions across the asset's lifespan while declining-balance method allocates a set percentage of the remaining depreciable value in each succeeding period.