Appreciation

An increase in property value.

In accounting, appreciation of an asset is an increase in its value. In this sense it is the reverse of depreciation, which measures the fall in value of assets over their normal life-time. Generally, the term is reserved for property or, more specifically, land and buildings. Applied to a currency, appreciation is a rise of its value in a floating exchange rate. In times of high inflation, appreciation of assets will be common to all balance sheet assets. In any viable modern economy, such property tends to increase in value over the years – if only because of the scarcity of usable land forces its price in a competitive situation. However, this belief has often caused speculative bubbles to arise. There are considerable difficulties in assessing the increase in value of any particular asset. This is principally because of the variety of interpretations that can be attached to the concept of value itself, as well as the various instruments and methods used in the valuation process.