Accrued depreciation is the difference between the current market value of a building and the total cost to reproduce it new. One reason for this difference is related to changes in tastes, preferences, technical innovations, or market standards. This is commonly referred to as:
A) physical deterioration
B) functional obsolescence
C) external obsolescence
D) tax depreciation

Question

Quizplus · Accepted Answer

Functional obsolescence refers to the loss in value of a property due to changes in market standards, tastes, preferences, or technical innovations that have made certain features of the property less desirable or valuable. This is different from physical deterioration, which refers to the wear and tear of the property over time, and external obsolescence, which refers to the loss in value due to external factors such as changes in the surrounding environment or economic conditions. Tax depreciation is a method used for allocating the cost of an asset over its useful life for tax purposes, and is not necessarily related to the market value of the asset.

Accrued Depreciation Is the Difference Between the Current Market Value