A valuation is an estimate or appraisal of what something is worth. A valuation can be measured as an asset or liability, and is documented in financial reports. It is important for the documented values to be correct for proper analysis.
Depreciation, amortization, and depletion are techniques used to distribute costs over a matter of time in order to know current market value. Although all three have the same basic function, the technique is determined by the type of asset being assessed.
Depreciation is the decrease in worth, or value, of a fixed asset over a period of time. This technique of figuring an asset’s worth is applied to tangible assets or assets that can be touched or seen, such as equipment, buildings, cash, and vehicles (Phung, 2014). There are several methods in figuring depreciation including the Straight Line Method and the Declining Balance Method. The most common, or most used method, is the Straight Line Method:
Cost of Asset – Salvage Value Useful Life

For example, the cost of an asset is $2,000 with a useful life of 3 years. The resale, or salvage value of the asset at the end of the 3 years is $500.
$2,000 - $500 = $500 3 years

The annual depreciation cost of the above scenario is $500. Amortization is the rationing out of an asset’s cost over the period of its useful life. This technique is applied to intangible assets, or assets that have no physical form. By dividing the total cost of as asset by the years of expected life, the amortization amount can be determined (Phung, 2014).

For example, the cost of a patent is $15 million and is good for 15 years. $15 million = $1 million 15 years
The amount to be documented for year would be $1 million over the 15 year period. Depletion is a way of determining and documenting the decrease of natural resources. These resources