It may help to think of what you have at the end of the period as being sold to the next period, and what you had at the start of the period as being purchased from the previous period. If you are calculating the RRHG for a liability, multiply the equation by minus 1. A liability is a negative asset in this system. 3 Restate to end of period dollars. Changes due to general economic conditions.
Depreciation measures the first change.
To avoid complications caused by the second change, we compare the market price of the asset that we had at the start of the year with the market price of the asset we had at the end of the year both measured at the same point in time, usually the end of the year. We subtract these two prices and divide by the price for a new asset at the end of the year. This gives the depreciation rate. If the market price of the new asset changed evenly throughout the year, we apply the depreciation rate to the average price of the new asset. If not, use a weighted average.