Comparing
depreciation and obsolescence based on various factors:
Factor | Depreciation | Obsolescence |
---|---|---|
Loss of Value | Gradual loss due to wear and tear, age, and use. | Can be sudden or gradual, resulting from external factors like technological advancements or changes in market demand. |
Condition | Related to the physical condition of the asset. | Related to external factors impacting the asset's relevance or utility. |
Nature of Impact | Internal factors like wear and tear. | External factors like technological changes or shifts in market demand. |
Age | Accumulates over the asset's useful life. | May occur at any stage of an asset's life, especially when it becomes outdated or irrelevant. |
Method to Find-out | Calculated using methods like straight-line, declining balance, or units of production. | Requires ongoing analysis of market trends, technological advancements, and other external factors affecting the asset. |