MEANING OF OBSOLESCENCE-ALL YOU NEED TO KNOW
Obsolescence is not depreciation. Both of them are two different terms. However, they are related. Depreciation is an accounting term and have a formal definition of ‘depreciation’, drafted by the Accounting Standard Committee (1987), is: “Depreciation is the measure of the wearing out, consumption, or other reduction in the useful economic life of a fixed asset whether arising from use, afflation of time or obsolescence through technological or market changes.
This definition is comprehensive and clearly stated what is the depreciation. Besides, the reader can understand the differentiation between the depreciation and obsolescence. Base on this definition, reader can understand the depreciation is a loss in the existing use value of the property and it occurs as the result of the building becoming obsolete. This implies that obsolescence is the cause of the building and depreciation is the effect of the obsolescence.
Obsolescence was defined differently by many studies in North America and the United Kingdom.
In the United Kingdom, according to Baxter (1971) defined obsolescence as “a decline in utility not directly related to physical usage or the passage of time. This definition is not quite correct because the author does not consider physical deterioration as part of obsolescence………………….READ MORE
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