Depletion refers to the allocation of the cost of natural resources over time. For example, an oil well has a finite life before all of the oil is pumped out. Therefore, the oil well’s setup costs are spread out over the predicted life of the well.
With depreciation, amortization, and depletion all three methods are noncash expenses with no cash spent in the years they are expensed. Also, it’s important to note that in some countries, such as Canada, the terms amortization and depreciation are often used interchangeably to refer to both tangible and intangible assets.