Depreciation and the Age-Life Method

Depreciation and the Age-Life Method The appraiser then subtracts "accrued depreciation," which is the loss in value over time. There are three types: Physical Deterioration (wear and tear like peeling paint), Functional Obsolescence (outdated design like a four-bedroom house with one bathroom), and External Obsolescence (outside factors like a noisy highway next door). The most common calculation method is the Age-Life Method (or straight-line depreciation). This formula assumes depreciation happens at a constant rate: (Effective Age ÷ Total Economic Life) × Cost New = Accrued Depreciation.