is the sum of all diminished value associated with the improvements. That is, any loss in value suffered by the improvements from any and all causes would be included in accrued depreciation. Accrued depreciation measures actual value loss and not theoretical value loss. Accrued depreciation is the difference between the cost new of improvements and the present worth of those improvements.

There are only three categories of accrued depreciation. Accrued depreciation can be categorized as physical depreciation, functional obsolescence, or economic obsolescence.