An economic depreciation that reflects an increase in the cash flows or capital return generated, or expected to be generated, from an asset (such as real estate, acquisitions, internal research and development, etc.)

Negative economic depreciation occurs in case the expected cash return (from an asset or investment) is less than the expected total return. This inverted situation usually arises in connection with investments with “back-loaded” cash flows such as training and capacity building, R&D, developing and deploying supply/ distribution networks, etc.

This is contrary to normal situations, where economic depreciation (positive economic depreciation) implies a decrease in asset values (in this sense, it is better described as positive economic depreciation). It is a type of depreciation that reflects the decline in an asset’s market value as a result of economic factors, such as wear and tear, change in market conditions or government policies, over time. These factors might be internal or asset-specific (wear and tear) or external (or broadly affecting assets in general: market conditions, government policies, obsolescence, etc.)

Normal depreciation implies a write-down of the value of an asset (a physical asset) over time.