Appraisal Method Of Depreciation

Nope, this isn’t how you’ll feel (or felt) when you hit forty. And it isn’t the many hours you’ll spend staring at your bulges and wrinkles.

It’s no secret that the value of an asset can decrease. The question is: how can you figure out just how much your asset has come down in value during a specific period of time? One answer is to use the appraisal method of depreciation.

You’ll make note of the value twice: when the period you’re keeping track of begins, and when it ends. Any change in a lower direction will reflect how much your asset has depreciated.

You THOUGHT you'd have that tractor smelting factory for 30 years. You paid $100 million for it. But now after seven years, with unions swirling, you realize you need to move production to China and Mexico to remain competitive. So you want to sell the factory in two years. You've depreciated $20 million from it thus far via standard application of straight line depreciation...and carry its value as $80 million. But is that the right number?

You're going to put in on eBay and auction it off in 24 months so you need an expert to come in and appraise what that factory would bring, in cash, in an open market bidding environment. Once you have that number, you can compare it to the original $100 million purchase price and see how much it has depreciated. So instead of using math-y guesses to figure depreciation, you use a current appraisal to make the calculation.