Depreciation

Short definition

Depreciation spreads a tangible asset’s cost over its useful life. It is not a cash outflow; it reduces EBIT and the tax base and is added back to EBITDA.

Detailed explanation

Method (straight-line, declining balance) and life estimates shift period profit; cash investment is a separate decision (capex). Inflation leaves historical-cost depreciation below economic wear; replacement capex is higher.

Tax depreciation can diverge from IFRS depreciation; the gap sits in deferred tax. Factory depreciation may sit in COGS, admin depreciation in opex; the EBITDA bridge follows that split.

Why it matters for the CFO

Treating EBITDA as cash is treating depreciation as optional; maintenance and replacement are deducted in CFADS. In DCF, depreciation is added after NOPAT and capex is deducted separately — they need not be equal.

How it is calculated

Dönem amortismanı ≈ (Maliyet − Hurda) / Faydalı ömür (doğrusal yöntem)

Variables in the formula

• Depreciation: Period depreciation expense
• Cost: Asset cost
• Salvage: Salvage value
• Life: Useful life (years)

How to read it

Depreciation / PPE reveals the life assumption. A sudden drop may be a life extension or a disposal. Component depreciation (IFRS) breaks the series.

Numerical example

Machine cost 100 mn TL, salvage 0, life 5 years, straight-line: annual depreciation = 100 / 5 = 20 mn TL.

Definitions are educational. They are not investment, credit or tax advice.