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Title: | Assessing Depreciation for Valuation Purposes - A Decompositional Approach |
Authors: | Gyamfi-Yeboah, F. Ayitey, J. |
Issue Date: | 2009 |
Publisher: | Journal of Science and Technology |
Citation: | Journal of Science and Technology, Vol. 29, No. 2, Aug., 2009 |
Abstract: | In valuing property one method that is commonly adopted in situations where market evidence is
non-existent is the Depreciated Replacement Cost method. As the name suggests, this involves
estimating the replacement cost as new of the property, which is the subject matter of the valuation,
and making allowances for accrued depreciation. The allowance made for depreciation is
important as it allows for the estimation of value that reflects the current state of the property.
The estimation of depreciation for valuation purposes has been the subject for a number of empirical
studies. There is however no consensus within the valuation profession as to which approach
to estimating accrued depreciation addresses the key elements that are of concern to the
valuer viz; age, condition and functional obsolescence. The paper proposes one such approach
that incorporates all these elements in the estimation of accrued depreciation for valuation purposes.
The approach first considers the individual causes of depreciation separately and uses
different methods to estimate accrued depreciation for each of the causes of depreciation. Total
accrued depreciation is then estimated by first taking account of curable physical depreciation
and then age and functional obsolescence. The approach proposed presents a basis for a more
comprehensive discussion and a subsequent adoption of a common methodology valuers can
rely on to estimate depreciation. |
Description: | Article published in the Journal of Science and Technology, Vol. 29, No. 2, Aug., 2009 |
URI: | http://hdl.handle.net/123456789/5030 |
Appears in Collections: | Journal of Science and Technology 2000-
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