overdepreciation

Overdepreciation

The act of depreciating an asset on a firm's balance sheet such that the asset is recorded as being worth less than it would be if it were sold. This results in the firm understating its earnings and/or the value of its assets.
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overdepreciation

1. Depreciation that is more than sufficient to allow for the eventual replacement of the asset being depreciated. Compare underdepreciation.
2. Depreciation that causes an asset to be carried on a firm's books at a lesser value than it would be worth if it were sold. Overdepreciation produces understated earnings and assets on financial statements. Compare underdepreciation.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.
References in periodicals archive ?
It is important to note that this ruling does not cover the prior year's overdepreciation. Such requests for change must still be made under the provisions of revenue procedure 92-20.
For the FEER to be re-established at [S.sup.*], an overdepreciation would be needed to reduce the stock of debt to the original level, resulting in the 'hysteresis loop' shown.(8)
In recent years, the former has been larger than the latter, and the CCAdj, therefore, has been an estimate of the overdepreciation of capital.