How is depreciation defined in the context of property value?

Depreciation is defined as the accounting recognition of the decrease in property value over time. This concept acknowledges that as properties age, their value typically diminishes due to various factors such as wear and tear, obsolescence, and market conditions.

In accounting terms, depreciation provides a systematic way to allocate the cost of a tangible asset over its useful life, reflecting its current worth on financial statements. This depreciation is crucial for both financial reporting and tax purposes because it helps determine the value of property for claims, sales, or assessments.

Understanding depreciation is particularly important for public adjusters, as they must accurately assess property value during the claims process. This ensures that all parties involved have a clear understanding of the current market value of an asset, factoring in the inevitable decline in value due to age and use.