The physical wear and tear of the equipment is divided into two kinds: the physical wear and tear of the equipment in the process of use is called the first kind of physical wear and tear; the wear and tear of the equipment in the process of idle storage is called the second kind of physical wear and tear. The resulting depreciation is collectively referred to as physical depreciation (DP), or physical depreciation. The degree of physical depreciation of equipment can be reflected in the physical depreciation rate.
Methods for determining physical depreciation:
1. Observation. Observation method is the appraiser through observation, by virtue of visual, auditory, tactile, or with the help of a small number of testing tools, equipment inspection, based on experience to identify the state of the object, the degree of wear and tear to make a judgment. In the absence of testing conditions, this is the most commonly used method.
For large equipment, in order to avoid the error of personal subjective judgment, can be used del illegal or fuzzy comprehensive judgment method.
2, the use of the age method. Age method is to estimate the depreciation from the point of view of the service life, it is assumed that machinery and equipment have a certain service life, the value of the equipment is directly proportional to the service life. Equipment in the use of the process, due to physical wear and tear makes the life of the equipment gradually consumed, until the life is exhausted, out of use. Therefore, the depreciation of the equipment can be expressed in terms of the consumption of the service life, and the physical depreciation rate can also be expressed in terms of the ratio of the service life to the total service life.
For complex equipment, the service life of each component is different, if each component can be replaced independently, the depreciation rate of the whole machine can be expressed by the formula.
3, repair cost method.
Note: the use of repair costs method should pay attention to the use of the premise, and distinguish between repairable loss and non-repairable loss.
Example 4-8 (Textbook 135) uses the age method to calculate the depreciation caused by irreparable wear and tear.
The following is the content of Lecture 7
(D) Functional depreciation
1. The first type of functional depreciation
Technological advances bring about a reduction in the cost of manufacturing caused by the cost of investment is also known as the cost of over-investment.
Note: If the current market price is used as the replacement cost, there is no need to consider the excess investment cost.
2, the second type of functional depreciation
Technological advances lead to a reduction in operating costs, also known as excess operating costs.
Note: Excess costs are after-tax, and the amount of depreciation is the discounted value of after-tax excess operating costs over the future useful life.
(v) Economic depreciation
Note that depreciation is caused by external factors.
1, shorter useful life;
2, higher operating costs;
3, increased competition in the marketplace and a decrease in the number of products sold.