Consumption of fixed capital (P51c) is the decline in value of fixed assets owned, as a result of normal wear and tear and obsolescence or normal accident damage.
Consumption of fixed capital covers anticipated terminal costs, such as the decommissioning costs of nuclear power stations or oil rigs or the clean-up costs of landfill sites. Such terminal costs are recorded as consumption of fixed capital at the end of the service life, when the terminal costs are recorded as gross fixed capital formation.
In the system of accounts, consumption of fixed capital is recorded below each balancing item, which is shown gross and net. Recording ‘gross’ means without deducting consumption of fixed capital, while recording ‘net’ means after deducting consumption of fixed capital.