When a company has a piece of property, plant, or equipment which has different components that depreciate at different rates, the total cost should be allocated to each component and each component should be depreciated separately.

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This is known as the componentization of assets and is required by generally accepted accounting principles (GAAP). It ensures that each component is accurately depreciated based on its own useful life and salvage value, rather than depreciating the asset as a whole.

When a Company Has a Piece of Property, Plant, or Equipment