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Why depreciation on an existing asset is always irrelevant?

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Wiki User
2007-08-11 17:41:28

Depreciation is an invisible, non-cash cost and it is irrelevant

when calculating the cash flow of the company which is the true

indicator of whether the company is making a profit or not.

Depreciation is also irrelevant because it is not truly realized

until the asset is resold or scrapped at the end of its life.

Recording it every year is consistent with the theory of

conservatism when writing off costs. Depriciation is also

irrelevant for the existing assets becoz it is fixed and fixed

costs are always irrelevant unless they are incremental


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