Here are some key points to note:

• Depreciation is a non-cash expense, meaning it doesn't involve an actual cash outflow.

• It's a way to allocate the cost of an asset over its useful life, rather than charging the entire cost to one period.

• Depreciation expense can significantly impact a company's profitability, as it can reduce net income.

• A high depreciation expense can indicate that a company has a large amount of assets that are aging or being used heavily, which can impact its financial performance.

For example, if a company purchases a piece of equipment for $10,000 that has a useful life of 5 years, it would record a depreciation expense of $2,000 per year ($10,000 ÷ 5 years). This would be reflected on the income statement as an expense, reducing the company's net income.

Depreciation = (Asset Cost - Residual Value) / Asset Life

Changes in asset cost, residual value, or life impact depreciation. Two calculation methods exist: straight-line and written-down value. Changes in depreciation policy significantly affect profits.

Key points:

1. Depreciation is a non-cash expense that represents the decrease in value of an asset over time.

2. It's calculated as (Cost - Residual Value) / Asset Life.

3. Changes in depreciation policy or estimates can significantly impact profits.

4. As an investor, it's essential to understand:

   • Depreciation is an expense that affects profits.

   • It's a non-cash expense, so no cash outflow is involved.

   • The method of depreciation affects the balance sheet and income statement.

   • Increased depreciation can indicate asset acquisitions, which can be a positive sign.

   • Changes in depreciation rates or methods should be carefully considered.

5. Amortization and depletion are similar non-cash expenses:

   • Amortization is the write-off of intangible assets like patents or goodwill.

   • Depletion is the allocation of natural resource costs over their estimated life.

6. These expenses reduce earnings but increase cash flow, with implications for tax commitments.

Where to find 

You can find information on depreciation in the following places:

• Schedules to the balance sheet

• Notes in the annual report or quarterly results

• Schedule on 'Significant Accounting Policies' (for method and rates of depreciation)

• Notes to accounts (for other accounting practices specific to the company)

These sources provide detailed information on a company's depreciation policies, methods, and rates, helping you better understand their financial performance.