Diminished value is the reduction in a vehicle's market value occurring after a vehicle is wrecked and repaired, otherwise called accelerated depreciation.
For tax purposes, accelerated depreciation provides a way of deferring corporate income taxes by reducing taxable income in current years, in exchange for increased taxable income in future years.
In many cases a compromise was reached in which the government paid partially or fully for the expansions in the form of tax breaks and accelerated depreciation.
Further, accelerated depreciation acts as a form of debt-free leverage, by essentially borrowing money, tax-free and risk-free, from the government (in terms of up-front tax deductions).
For financial reporting purposes, the two most popular methods of accelerated depreciation are the double declining balance method and the sum-of-the-years digits method.
