Section 1. Main production assets

Chapter 3. Depreciation of fixed production assets and its impact on the value of the objects being valued

3.4. External wear and tear (economic obsolescence) of fixed production assets and principles for its determination

It should be recalled that external wear and tear (economic obsolescence) is the loss of value of an object, which is caused by the negative influence of external factors. Here are some examples.

1. Inflation in the country depreciates money, and therefore the real value of the object.

2. The deterioration of the financial capabilities of the population leads to the need to sell properties at reduced prices.

3. The deterioration of the quality of labor and raw materials does not allow the production of expensive products.

4. Inconvenient location:

At home (far from the metro, school, swimming pool, etc.) sharply reduces the cost of apartments in this building and vice versa;

Stores located in the city center and on the periphery may be valued differently;

Offices located in a prestigious location (business center) and on the periphery cost differently;

Enterprises with good access roads, proximity to the labor force and poor access roads (or none at all) or remote from the places of residence of the labor force have different chances in the labor market.

5. The inconvenient design of the machine increases the number of maintenance personnel, the amount of electricity used, and therefore the operating costs of maintaining the machine, which increases its cost.

6. When the appraiser, during a site inspection, identifies problems associated with the state of the environment, he must find out the nature and extent of pollution; take into account possible options for eliminating the causes of environmental pollution, that is, determine the possibilities of eliminating the source of pollution, and then express all this in cost form and take it into account in assessing the value of the object.

In general, the calculation of external wear of technical devices, depending on the available information, can be carried out in different ways. For example,

1st option. Financial resources for eliminating external unfavorable factors are equal to the amount of external wear and tear of the assessed object.

2nd option. Paired sales of comparable technical devices are analyzed. In this case, the formula is used

T1 – the price of an object that has signs of external wear,

T2 - the price of an object that does not have signs of external wear,

Rts - the difference in price characterizes the amount of external wear of the object being valued.

3rd option. Rental income from comparable properties is compared. The following formula is used:

Ka - capitalization of income received

object A,

Kb - capitalization of income received

object B,

Рд - the difference in income characterizes the amount of external wear and tear of the valuation object.

The appraiser must express all these external factors, independent of the object being valued, in rubles and subtract the resulting amount from the total gross value of the object.

Obsolescence

Functional wear and tear includes a decrease in the value of property associated with the inconsistency of design and planning solutions, construction standards, design quality, and manufacturing materials with modern requirements for these items.

The amount of removable wear and tear is determined as the difference between the potential value of the building at the time of its assessment with updated elements and its value at the date of assessment without updated elements (the difference between the cost of reproduction of the building and its replacement cost).

Functional wear can be removable or irreparable. Removable functional wear is most often calculated using the cost method.

Disadvantages that require replacement or modernization of elements are items that still perform their functions, but no longer meet modern standards (water and gas meters and fire-fighting equipment). Depreciation for these items is measured as the cost of existing elements, taking into account their physical deterioration, minus the cost of returning materials, plus the cost of dismantling existing ones and plus the cost of installing new elements. The cost of returning materials is calculated as the cost of dismantled materials and equipment when used at other facilities (revisable residual value).

Irremovable functional wear and tear is caused by outdated space-planning and/or structural characteristics of the buildings being assessed relative to modern construction standards. A sign of irreparable functional wear and tear is the economic inexpediency of spending on eliminating these deficiencies. In addition, it is necessary to take into account the market conditions prevailing at the date of the assessment to ensure that the building is adequately architecturally suited to its purpose.

Depending on the specific situation, the cost of irreparable functional wear and tear can be determined in two ways:

* capitalization of losses in rent;

* capitalization of excess operating costs.

To determine the necessary calculation indicators (rental rates, capitalization rates, etc.), adjusted data for comparable analogues are used.

In this case, the selected analogues should not have signs of irreparable functional wear identified in the object being assessed. In addition, the total income generated by the property complex as a whole (building and land) and expressed in rent must be divided accordingly into two components. To allocate part of the income attributable to the building, you can use the investment balance method for the building or the method of analyzing the ratio of the value of the land plot and the total sales price of the property complex.

Determination of impairment caused by irreparable functional wear and tear due to an outdated space-planning solution (specific area, cubic capacity) is carried out by the method of capitalizing losses in rent.

Calculation of irreparable functional wear and tear by capitalizing the excess operating costs required to maintain the building in good condition can be done in a similar way. This approach is preferable for assessing the irreparable functional wear and tear of buildings that are distinguished by non-standard architectural solutions and in which, nevertheless, the amount of rent is comparable to the rent for modern analogue facilities, in contrast to the amount of operating costs.

External wear

External or economic wear and tear - depreciation of an object due to the negative influence of the external environment on the object of assessment: location, market situation, easements imposed on a certain use of real estate, changes in the surrounding infrastructure and legislative decisions in the field of taxation, etc. Although external wear cannot be eliminated in most cases, it can sometimes resolve itself due to a positive change in the surrounding market environment.

The following methods can be used to assess external wear:

* method of capitalization of losses in rent;

* method of capitalization of excess operating costs;

* sales comparison method.

The assessment of external wear and tear by the method of capitalizing losses in rent and the method of capitalizing excess operating losses is carried out similarly to the calculation by these methods of functional wear and tear discussed above. In the case of an external wear assessment, it is necessary to identify losses in rent caused by signs of external wear or excess operating costs caused by signs of external wear.

The sales comparison method consists of identifying a market assessment of the accumulated depreciation of an object by comparing its replacement cost with the current sales prices of comparable objects.

Stages of method implementation:

1. Selection of recent sales of objects similar to the property being assessed in terms of the nature of the improvements, adjusting their prices and generating information to determine the replacement cost of the building;

2. Determination of the cost of a plot of land for each comparable property;

3. Determining the prices of buildings taking into account depreciation by excluding the cost of land plots from the sales prices of comparable objects;

4. Calculation of the current replacement cost of each comparable object;

5. Determining the amount of accumulated depreciation of comparable buildings by subtracting their prices taking into account depreciation from the current replacement cost of the same buildings;

6. Determination of the average percentage of depreciation of comparable buildings for its transfer to the assessment object.

The advantage of the method lies in the objectivity of its results, since by comparing sales, the appraiser only identifies the market reaction to the aging of the property and environmental changes.

The disadvantage of the method is the impersonality of the identified type of wear, that is, in the absence of the possibility of differentiation by types and types of wear, which limits the use of this method in property management. In addition, the method is quite labor-intensive, since it requires calculations not only to compare sales, but also to determine the value of land plots and the replacement cost of improving all objects.

One of the main factors causing a decrease in the reliability of machines over time is the wear and tear to which machines and equipment are subjected from the beginning of operation.

V.Yu. Belopashentsev, an expert automotive technician, a practicing appraiser of machinery and equipment since 1997, - about methods for determining various types of wear.

In the previous material, we examined methods for determining the degree of physical wear of machines when assessing them. The next material is about functional and external (economic) wear and tear.

Functional wear and tear of machines

In contrast to physical wear and tear, which is absolute, functional wear is relative: it is the loss of value of a machine (the object of assessment) as a result of the use of new technologies and materials in the production of similar equipment and an increase in costs during its operation.

To accelerate functional wear, i.e. the frequency of changes in generations of machines and technologies is influenced by scientific and technological progress.

In relation to assessment issues, two aspects of the possible difference between a new object and an old one are usually considered.

Based on cost items, the following groups of functional wear and tear (obsolescence) are distinguished:

1. depreciation due to excess capital expenditure.
   This wear and tear is the result of technological changes, the introduction of new materials or the inability to optimally use equipment, or an imbalance in the production process. This type of functional wear is often called technological obsolescence.

   The functional wear coefficient is determined by the formula:

   K fun = 1 - (Po/Pa)*n,
   where Po is the productivity of the old equipment being evaluated; Pa - the performance of new equipment or an analogue; n is the price deceleration coefficient.

2. wear caused by excess production costs.
   This wear and tear occurs as a result of improvements in technology or increased efficiency in placement and layout. This type of functional wear is often called operational obsolescence.

Determining the depreciation of plant and equipment caused by operational obsolescence includes the following steps:

1. determination of annual operating costs when using the assessed object;
2. determination of annual operating costs when using an analogue;
3. determining the difference in operating costs;
4. taking into account the impact of taxes;
5. determining the remaining economic life of the assessed object or the time to eliminate deficiencies;
6. Determining the present value of annual future losses at the appropriate discount rate.

Operational obsolescence can be thought of as the present cost of future excess production costs. Depending on the type of excess production costs associated with existing equipment, a distinction is made between operational obsolescence caused by increased a) investment costs; b) operating costs.

External (economic) wear and tear of machines

External wear and tear is manifested in the loss of value caused by major industry, regional, national or global technological, socio-economic, environmental and political changes, for example, reduction in supply and demand for a certain type of product, deterioration in the quality of raw materials, labor, support systems, facilities, legal changes.

There are two approaches to determining the amount of external wear:

1) capitalization of loss of income related to external influences;

2) comparison of sales of similar equipment in the presence and absence of external influences.

If there is a sufficient amount of data, the second approach is more preferable.

Economic obsolescence is influenced by a large number of factors, and it is not always possible to prove that depreciation occurs for one reason or another.

When applying the cost approach, underutilization of equipment due to external wear and tear can be assessed using relative indicators. Typically this indicator is the relative coefficient of equipment underutilization:

In = (V actual/V nom),

where B actual and B nominal -) respectively actual and nominal output (in monetary terms) for a certain period of time.

The coefficient of external economic wear and tear of equipment is equal to

K and, in = 1 - In

When determining the external economic wear and tear of machinery and equipment, it is important to clearly understand the true reasons for the decrease in output.

Cumulative (accumulated) wear and tear of machines

Coefficients of physical, functional and economic depreciation are usually calculated as shares or percentages of the cost of reproduction or replacement cost. To determine the coefficient of total (Accumulated) wear, there are 1) additive and 2) multiplicative approaches.

1. With the additive approach, the total wear coefficient (K) is determined by adding the coefficients of physical, functional and economic wear.
   K = K physical + K fun + K vn
2. With a multiplicative approach, the basis for determining wear rates is the cost, from which previously taken into account types of wear are excluded. In this case, the total wear coefficient (K) is determined by the formula:
   K = 1 - (1 - K physical) x (1 - K fun) x (1 - K in)

At using the income approach In general, special accounting for any type of wear and tear is not required, since the influence of each of them is manifested in the amount of income generated by the object of assessment.

When determining the comparative approach, market prices (Ps) of identical objects or close analogues are usually used as the basis for determining the cost of a car. It is believed that these prices already take into account the functional and external wear and tear of equipment that is almost the same as the object being valued.

Therefore, it is only necessary to determine its physical wear and tear in order to adjust the prices of similar analogues by degree of wear, if necessary:

C = Tsan x (1 - Ki, physical, ots)/(1 - Ki, physical, an), where Ki, physical, ots; Ki, physical, an - coefficients of physical wear and tear of the object being assessed and a close analogue, respectively.

When using the cost approach The process of determining the cost (C) of an appraisal object comes down to determining the full reproduction cost (C), followed by taking into account depreciation due to all three types of depreciation:

C = St (1 - Ki, physical) x (1 - Ki, Fun) x (1 - Ki, int).

The formulas for determining wear rates given above show that the procedure for accounting for all three types of wear assumes a certain sequence:

• Physical wear and tear is always taken into account first;
• then functional;
• then - external (economic wear and tear).

Prepared by Natalia Panasenko

The problem of correctly calculating the external wear and tear of fixed assets of Russian industrial enterprises is quite acute, especially taking into account the fact that many property complexes of existing enterprises were built before the 1990s. Industrial enterprises as a result of a sharp change in the system of economic relations in the 1990s. found themselves in a difficult situation. The loss of old economic ties with suppliers of raw materials and consumers of products led to a significant decrease in the economic efficiency of activities.

The task of overcoming the crisis has faced most industries, among which are instrument making, mechanical engineering, the chemical industry, the aviation industry, the coal mining industry and many others.

In the current conditions, the assessment of fixed assets of Russian enterprises requires, first of all, the correct calculation of all types of wear and tear (physical and functional), taking into account significant moral and physical obsolescence of objects, as well as external (economic), taking into account changes that have occurred in the environment of objects.

Existing methods for calculating external wear

External (economic) depreciation of fixed assets is manifested in the loss of value caused by major industry, regional, national or global technological, socio-economic, environmental and political changes, for example, a reduction in demand or supply for a certain type of product, deterioration in the quality of raw materials, labor, auxiliary systems, structures, communications, changes in legislation, etc.

In educational and methodological literature, two groups of methods for determining external wear are usually distinguished:

1. methods based on comparison of sales of similar objects under stable and changed external conditions;
2. methods based on the analysis of income losses related to changes in external conditions (for example, the method of capitalizing income losses).

All methods are based on comparing similar objects in two states:

1. before external conditions change;
2. after changes in external conditions.

The main difficulties lie in determining the “point” of zero external wear and the operating parameters of the object (objects) in the absence of external wear. Therefore, many appraisers use a method based on operating load analysis to determine external wear (see, for example,). In this case, the amount of external wear is determined by the following formula:

D external = 1 - K p

Where
D external - the amount of external wear, %;
TO— operational load of an asset (group of assets);
N— braking coefficient or scale factor.

To determine the operating load, the current level of production volume of the property complex is usually compared with design indicators, with the maximum historical production volume of the property complex or the production capacity of the property complex at the time of assessment.

This model has a number of disadvantages, the most significant of which are the following:

• underutilization of an asset can be caused not only by the influence of the external environment (i.e. external wear and tear), but also by factors such as inadequate management, functional obsolescence of the asset, use of the asset not in accordance with Linear Energy Regulations, etc. In addition, we can give examples of assets (industries) for which a drop in load did not lead to external wear and tear;
• Using this model, the appraiser actually answers the question: how much would the cost of constructing an asset have changed if it had initially been designed for a lower design capacity. This does not take into account some economic characteristics of the asset, for example, the difference in the cost of the same volume of finished products produced using an asset of different design capacity. The use of production equipment of lower production capacity can lead to a reduction in the cost of producing the same volume of products by reducing, for example, energy consumption, but in some cases it has absolutely no effect on the economic efficiency of producing this volume of products.

According to the authors of the article, in many cases, when assessing property complexes, it is more preferable to use methods for calculating the external depreciation of fixed assets, which belong to the group of methods for analyzing income losses. This article describes one such method. This method was tested by specialists from the valuation department of the FBK company, who have significant experience in valuing fixed assets and businesses of enterprises in various industries.

Description of the methodology for calculating external wear and tear based on an analysis of the profitability of fixed assets

Mandatory conditions for using the proposed methodology are:

• availability of information on a number of homogeneous companies in the industry, carrying out the same type of economic activity and having a similar composition of fixed production assets;
• differences in the operating conditions of the homogeneous companies under consideration, allowing the activities of individual enterprises to be considered more profitable than the activities of others.

The method allows you to calculate the external wear and tear of a group of fixed production assets of a company. The basis of the methodology is the analysis of the profitability of fixed production assets for a sample of enterprises in a particular industry and the identification of companies whose fixed assets are characterized by the presence of external wear and tear and companies whose fixed assets are free from external wear. The algorithm for calculating external wear includes several stages:

1. Determination of the market value of fixed production assets (except for excess assets not related to core activities) of enterprise facilities as of the current valuation date, taking into account all types of depreciation, with the exception of external depreciation.
2. Determination of projected revenue from the main production activity for the same period of time (for example, one calendar year) after the valuation date for all enterprises participating in the analysis.
3. Determination of the projected cost of core activities minus depreciation for the same period of time (for example, one calendar year) after the valuation date for all enterprises participating in the analysis.
4. Determination of profit from core activities as the difference between revenue and cost excluding depreciation.
5. Determining the profitability of fixed assets by dividing the profit from the main production activities by the market value of fixed assets, calculated at the first stage.
6. Analysis of profitability indicators of fixed production assets for a group of enterprises and identification of companies whose fixed assets are characterized by the presence of external wear and tear.
7. Calculation of external wear.

The proposed methodology was used by the FBK company when assessing the business of Russian coal mining companies. The coal mining industry has a number of characteristic features that lead to external wear and tear on the fixed assets of some enterprises:

• Most coal mining enterprises have been operating for more than 20 years. The property complexes of many coal mining enterprises were built before 1990 and were designed for operating conditions different from the current ones;
• the composition of fixed production assets at all coal mining enterprises is approximately the same;
• the quality of steam coal differs markedly from deposit to deposit, which significantly affects the prices of sales of coal products to end consumers and the demand for products;
• the conditions for coal mining and the cost of production for different enterprises differ significantly depending on the geological features of the coal seams, the degree of depletion of the deposits and the mining method;
• the transport component in the final price of coal products is very significant, which negatively affects the economic efficiency of coal mining enterprises located far from potential sales markets;
• The volumes of activity of many coal mining enterprises are significantly below their production capacity due to the lack of demand for products.

When conducting the analysis, a number of enterprises were excluded from the initial sample of coal mining companies due to atypical operating conditions, namely a specific operating scheme when a coal mining enterprise sells the majority of specialized production assets to a third party, which then produces coal under a contract. Indicators of profitability of fixed assets of such enterprises cannot be used for analysis.

An analysis of the profitability of fixed production assets was carried out on the basis of data from twelve coal mining enterprises that have the necessary specialized assets and independently produce and sell coal (Table 1).

Table 1. Information on fixed assets of coal mining enterprises

In order to maintain the confidentiality of information, the monetary units in which the value of fixed assets and other monetary indicators are expressed have been changed. This change did not affect the values ​​of the relative indicators calculated during the analysis. The level of utilization of fixed production assets is understood as the ratio of the actual volume of coal production to the declared production capacity of the enterprise.

As can be seen from table. 1, the adjustment coefficient for the residual book value of fixed production assets, obtained after calculating their market value without taking into account external depreciation, differs markedly for different enterprises (from 1.74 to 24.52 times). Such a significant difference between the book value of objects and their market value does not allow using accounting data as a basis for calculating profitability indicators. That is why it seems advisable to calculate the profitability of fixed production assets on the basis of their market value. In addition, for analysis purposes, it is advisable to adjust the market value of fixed assets by the amount of excess assets not involved in the main activity (coal mining).

The profitability of fixed assets of coal mining enterprises was determined as the ratio of profit from core activities (extraction and sale of coal products) to the market value of fixed assets (except for excess) without taking into account external depreciation as of the date of assessment (in this example, the assessment date was 07/01/2004. or 01.10.2004). Profit from the production and sale of coal products is equal to the difference between the proceeds from the sale of coal products and the cost of production. In doing so, the authors used predicted revenue and cost indicators for 2005.

The results of the calculations are presented in table. 2.

Table 2. Profitability of fixed assets of coal mining enterprises

As can be seen from the table, the spread of the values ​​of profitability of fixed assets of twelve coal mining companies is large. This is due both to the presence of external wear and tear on the fixed assets of individual enterprises, and to the presence of operating conditions at other enterprises that are atypical for the industry. All companies participating in the analysis were conditionally divided into three groups.

The first group of two companies (No. 5, 12) has the highest rates of return on fixed assets, significantly exceeding similar rates for other enterprises. The results of the analysis showed that this fact is due to the presence of competitive advantages of these companies compared to other market participants, namely lower production costs, higher quality coal, favorable geographical location, ensuring stable demand from consumers and higher sales prices of products and etc.

The second group of four companies (No. 3, 4, 6, 9) has sample average profitability values ​​in the range of 49...61%. As the analysis showed, the operating conditions of these companies are the most typical for the industry. All companies have the necessary production assets and independently produce and sell coal products. The average profitability for these companies was 55.1%.

The third group of six companies (No. 1, 2, 7, 8, 10, 11) is characterized by the lowest rates of return on fixed assets - from 7.6 to 39.2%. These enterprises have a “heavy” asset structure, a higher cost of coal production compared to competitors, due to the depletion of deposits and difficult geological mining conditions, and an unfavorable geographical location in relation to sales markets. These facts indicate the presence of external wear and tear on the fixed assets of these companies, due to changes in the external environment that have occurred since their creation.

Thus, taking into account the analysis, it was concluded that the fixed assets of companies of the third group are characterized by the presence of external wear and tear. The calculation of external depreciation of fixed assets of these companies was based on the arithmetic average value of profitability for four companies that had average indicators for the sample. The formula for calculating external wear is as follows:

Where
D B — external wear, %;
R0— profitability of fixed assets excluding excess assets, %;
R cp is the average return on fixed assets.

In table Table 3 shows the results of calculating external wear and tear and the market value of fixed production assets of companies of the third group.

Table 3. Calculation of external wear and tear and market value of fixed assets

Analysis of the results obtained

In order to analyze and compare the results, the calculation of external wear and tear on fixed production assets of twelve coal mining enterprises was carried out using the method of operating load analysis. Calculations were performed in accordance with the methodology outlined in, the results are presented in table. 4.

Table 4. Calculation of external wear using the operating load analysis method

As can be seen from table. 4, the operational load analysis method gives rather contradictory results:

1. External wear was “identified” only in two companies (No. 8 and No. 10). For companies No. 1, 2 and 11, external wear was 0%. At the same time, company No. 7 is characterized by the lowest return on fixed assets in the sample of companies (7.6%), i.e. In most cases, external wear was underestimated by this method.
2. Company No. 10 has the maximum external wear (50%). Despite the low utilization of fixed production assets, the profitability of fixed assets is quite high. In this case, this method showed an overestimated wear value.

It can be concluded that the operating load analysis method has significant limitations in application and can be used in practical calculations only with an in-depth analysis of the causes of external wear and analysis of the cost structure characteristic of a given industry.

At the same time, the calculation of external depreciation of fixed assets of twelve coal mining companies as part of a business assessment, carried out using the method of analyzing the profitability of fixed assets, made it possible to significantly bring the assessment results of the cost approach closer to the results of the income and comparative approaches. This fact, according to the authors of the article, as well as the results of comparison with the operational load analysis method, allow us to judge the justification and validity of the application of the proposed method.

It should also be noted that the method of analyzing the profitability of fixed assets makes it possible to determine the amount of external wear and tear of the entire property complex of the enterprise. The authors used this methodology to evaluate the business of these companies, so the resulting depreciation amount was not distributed among individual inventory items. Determining external wear and tear for each inventory item can be done as follows:

1. Find the amount of external wear in monetary terms in accordance with the previously given algorithm. In this case, to calculate the profitability ratio of fixed assets in the profitability analysis method, the cost of all fixed assets involved in the main production activity should be used.
2. In most cases, only specialized* fixed assets of the company being valued will be subject to external wear and tear. Therefore, the resulting amount of external depreciation in monetary terms should be distributed only among these assets.

The disadvantage of the method for calculating external wear and tear proposed in this article is, first of all, its limited application due to the need to collect information simultaneously for a group of similar enterprises, as well as the associated need to calculate the market value of fixed production assets of all enterprises participating in the analysis and make forecasts profits from core production activities.

In the future, widespread use of the method without calculating the market value of fixed assets is possible provided that the financial statements of Russian enterprises are brought into compliance with International Reporting Standards, the fundamental principles of which are to reflect the company's assets at their fair value. In such conditions, the calculation of the profitability of fixed assets can also be carried out on the basis of their book value.

Literature

1. Andryushchenko V.S., Gorbach SP. Determination of economic depreciation when assessing market value using the cost approach // Valuation issues. 2002. No. 4.
2. Capital investment standards: Reference, manual / A.A. Malygin, N.M. Laryushkina, A.G. Vitin et al. M.: Economics, 1990.
3. Tarasevich E.I. Property valuation. St. Petersburg: St. Petersburg State Technical University, 1997.

* Specialized property is property that is rarely (if ever) sold on the open market except through the sale of the business of which it is part because of its uniqueness arising from its specialized nature... (IVS 2003, Sixth Edition, IPO -1, clause 3.5).

General concepts and terminology

Depreciation is characterized by a decrease in the usefulness of a property, its consumer attractiveness from the point of view of a potential investor and is expressed in a decrease in value (depreciation) under the influence of various factors over time. As the facility is used, the parameters characterizing the structural reliability of buildings and structures, as well as their functional compliance with current and, especially, future use associated with human life, gradually deteriorate. In addition, the value of real estate is no less influenced by external factors caused by changes in the market environment, the imposition of restrictions on certain uses of buildings, etc.

Depreciation (I) is usually measured as a percentage, and the monetary expression of depreciation is depreciation (O).

Depending on the reasons causing the depreciation of a property, the following types of wear and tear are distinguished: physical, functional and external.

Classification of depreciation of real estate objects

Each type of wear is characterized by its division: removable and irremovable. In the most general case, removable wear is called wear, the elimination of which is physically possible and economically feasible. At the same time, economic feasibility lies in the fact that the costs incurred to eliminate one or another type of wear and tear should help increase the value of the object as a whole.

When all designated types of wear and tear are identified, they speak of the total accumulated wear and tear of the property. In monetary terms, the total wear and tear is the difference between the replacement cost and the market price of the property being valued. Based on the essence of these definitions, it can be argued that the total accumulated wear and tear is, first of all, a function of the lifetime of the object. Taking this circumstance into account, let us consider the essence of the main evaluative concepts characterizing this indicator:

Physical life buildings (FZ)- determined by the period of operation of the building, during which the condition of the load-bearing structural elements of the building meets certain criteria (structural reliability, physical durability, etc.). The physical life of an object is laid down during construction and depends on the capital group of the buildings. Physical life ends when the object is demolished.

Chronological age (CA) - this is the period of time that has passed from the date the facility was put into operation until the date of assessment.

Economic Life (EJ) - determined by the operating time during which the object generates income. During this period, improvements made contribute to the value of the property. The economic life of an object ends when the operation of the object cannot generate the income indicated by the corresponding rate for comparable objects in this segment of the real estate market. In this case, the improvements made no longer contribute to the value of the object due to its general wear and tear.

Effective age (EA) - determined on the basis of the chronological age of the building, taking into account its technical condition and the economic factors prevailing on the valuation date that influence the value of the assessed object. Depending on the operating characteristics of the building, the effective age may differ from the chronological age up or down. In the case of normal (typical) operation of a building, the effective age is usually equal to the chronological age.

Remaining Economic Life (REL) of a building is the period of time from the date of valuation until the end of its economic life.

The subjectivity of determining such indicators as economic life and effective age requires the appraiser to be quite highly qualified and have considerable practical experience. Depreciation in valuation practice must be distinguished in meaning from a similar term used in accounting (depreciation). The meaning of depreciation in accounting is the regular distribution of initial investments in an object (book value) for the entire period of its operation in accordance with the norms of depreciation charges for the “full” restoration of fixed assets. Estimated depreciation is one of the main parameters that allows you to calculate the current (actual) value of an object of assessment on a specific date.

Physical deterioration

Physical wear and tear is the gradual loss of the technical and operational qualities of an object originally laid down during construction under the influence of natural and climatic factors, as well as human activity.

The following methods for calculating the physical deterioration of buildings are distinguished:

normative (for residential buildings);

cost;

lifetime method.

Standard method for calculating physical wear and tear

The normative method for calculating physical wear and tear involves the use of various normative instructions at the interindustry or departmental level. As an example of such instructions, one can name the “Rules for assessing the physical deterioration of residential buildings” VSN 53-86 of Gosgrazhdanstroy (State Committee for Civil Construction and Architecture under GOSSTROE of the USSR. Moscow, 1990), used by the Bureau of Technical Inventory for the purpose of assessing the physical deterioration of residential buildings during technical inventory, planning major repairs of the housing stock, regardless of its departmental affiliation.

These rules describe the physical wear and tear of various structural elements of buildings and their assessment.

The physical wear and tear of a building should be determined using the formula:

Fф = ,

Where Ff- physical wear and tear of the building, (%);

Fi- physical deterioration i th structural element (%);

Li- coefficient corresponding to the share of replacement cost i th structural element in the total replacement cost of the building;

n- the number of structural elements in the building.

The shares of the replacement cost of individual structures, elements and systems in the total replacement cost of the building (in%) are usually taken according to aggregated indicators of the replacement cost of residential buildings, approved in the prescribed manner, and for structures, elements and systems that do not have approved indicators - according to their estimate cost.

The described technique is used exclusively in domestic practice. Despite all its clarity and persuasiveness, it has the following disadvantages:

due to its “normativity”, it initially cannot take into account the atypical operating conditions of the object;

labor-intensive application due to the required detailing of the structural elements of the building;

inability to measure functional and external wear;

subjectivity of specific weighing of structural elements.

Cost method for determining physical wear and tear

Physical wear and tear at the time of its assessment is expressed by the ratio of the cost of objectively necessary repair measures to eliminate damage to structures, an element, a system or a building as a whole, and their replacement cost.

The essence of the cost method for determining physical depreciation is to determine the costs of recreating building elements.

The described methodology allows you to calculate the wear and tear of elements and the building as a whole immediately in cost terms, which is more preferable than other methods for calculating physical wear and tear. In addition, since the impairment calculation is based on the reasonable actual cost of bringing worn-out items to “substantially new condition,” the result under this approach can be considered fairly accurate. Among the disadvantages inherent in this method, it is necessary to note the mandatory detail and accuracy of calculating the costs of repairing worn-out elements of the building.

Determination of physical deterioration of buildings using the lifespan method

Based on the essence of the previously discussed basic evaluative concepts characterizing the total accumulated wear and tear of a building from the point of view of its operation time, it can be argued that physical wear and tear, effective age and economic life are in a certain ratio. This relationship can be expressed by the following formula:

I(%)=(EV/FJ)(100 – (EV/OV+OSFJ))/100, (1)

Where AND(%)- wear as a percentage;

EV- effective age, determined by an expert based on the technical condition of the elements or the building as a whole;

VF- typical physical life span;

OSFJ- the remaining period of physical life.

In this case, physical depreciation can be calculated both for individual elements of the building with the subsequent summation of the calculated impairments, and for the building as a whole. Sometimes, for approximate calculations of wear and tear, appraisers can also use a simplified formula that takes into account the relationship between the chronological age and physical life of the building:

I(%) = (HV/VF)/100 , (2)

Where AND(%)- wear as a percentage;

VF- typical physical life span.

The application of this formula (2) is also relevant when calculating percentage adjustments for wear and tear in compared objects (comparative sales method), when it is not possible for the appraiser to inspect selected analogues to determine the indicators used in the calculation formula (1).

The percentage of depreciation of elements or the building as a whole calculated in this way can be translated into monetary terms (depreciation):

O= BC *(I/100),

Where AND- wear as a percentage;

Sun- replacement cost.

As noted earlier, physical wear and tear is divided into removable and irreparable. In addition, in practice, elements of a structure that have removable and irreparable physical wear are divided into long-lived and short-lived.

Short-lived elements- elements that have a shorter lifespan than the entire structure (roofing, plumbing equipment, etc.).

For long-lived elements, the expected lifespan is comparable to the lifespan of the entire structure (foundation, load-bearing walls, etc.).

Removable physical wear of short-lived elements

The cause of removable physical wear and tear is the natural wear and tear of building elements over time, as well as careless operation. In this case, the selling price of the building is reduced by the corresponding impairment, since the future owner will need to carry out “previously deferred repairs” in order to restore the normal operational characteristics of the structure (routine repairs of the interior, restoration of areas of leaking roofing, etc.). This assumes that the items are restored to a “virtually new” condition.

So, removable physical wear and tear in monetary terms is defined as the “cost of deferred repairs,” i.e. costs of bringing the object to a condition equivalent to the original one.

Unrecoverable physical wear of components with a short lifespan

Unrecoverable physical wear of short-life components represents the cost of restoring these rapidly wearing components and is determined by the difference between the replacement cost and the amount of removable wear multiplied by the ratio of the chronological age and the physical life of these elements.

Removable physical wear of elements with a long lifespan

Removable physical wear and tear of elements with a long lifespan in cost terms can be determined by the reasonable costs of its elimination, similar to the reversible physical wear and tear of elements with a short lifespan.

Irremovable physical wear of long-life elements

Irreparable physical deterioration of long-life elements is determined by the difference between the replacement cost of the entire building and the sum of removable and irreparable deterioration, multiplied by the ratio of the chronological age and the physical life of the building.

Functional wear

Signs of functional wear and tear in the building being assessed, as a rule, are the non-compliance of its space-planning and/or design solutions with modern standards, including various equipment necessary for the normal operation of the structure in accordance with its current or intended use.

Depending on the physical possibility and economic feasibility of eliminating the causes that caused functional wear, it is divided into removable and irreparable. The cost expression of functional wear is the difference between the cost of reproduction and the cost of replacement, since the calculation of the latter, based on its definition, obviously excludes functional wear from consideration.

Removable functional wear

Removable functional wear and tear is usually determined by the cost of necessary reconstruction to facilitate more efficient operation of the property.

Reversible functional wear is considered to be caused by:

shortcomings that require adding elements,

deficiencies requiring replacement or modernization of elements,

super improvements.

Deficiencies that require addition include elements of the building and equipment that do not exist in the existing environment and without which it cannot meet modern performance standards. Depreciation due to these items is measured by the cost of adding these items, including their installation.

Disadvantages that require replacement or modernization of elements include items that still perform their functions, but no longer meet modern standards (water and gas meters, etc.). Depreciation for these items is measured by the cost of existing elements, taking into account their physical wear and tear, minus the cost of returning materials, plus the cost of dismantling existing elements and plus the cost of installing new elements. In this case, the cost of returning materials is defined as the cost of dismantled materials and equipment when used at other facilities (revisable residual value).

Super-improvements include positions and elements of the structure, the availability of which is currently inadequate to modern requirements of market standards. Removable functional wear and tear in this case is measured as the current replacement cost of the “over-improvement” items minus physical wear and tear, plus the cost of dismantling and minus the salvage value of the dismantled elements.

An example of over-improvement would be a situation where the owner of a house, adapting it for himself, made some changes for his own convenience (investment value) that were not adequate from the point of view of a typical user. These include, for example, the redevelopment of the usable area of ​​​​premises for a specific use, determined by the owner’s hobbies or his occupation. Removable functional wear in such a situation is determined by the current cost of bringing the changed elements to their original state. In addition, the concept of over-improvement is closely related to the segment of the real estate market, where the same improvements can be considered both appropriate for a specific segment and excessive from the point of view of the typical user.

Unrecoverable functional wear

Irremovable functional wear and tear is usually caused by outdated space-planning and/or structural characteristics of the buildings being assessed relative to modern construction standards. First of all, the economic inexpediency of spending money on eliminating these shortcomings allows us to judge the sign of irreparable functional wear. In addition, it is necessary to take into account the market conditions prevailing at the date of assessment in order for the building to be adequately architectural for its purpose.

However, depending on the specific situation, the cost of irreparable functional wear and tear can be determined in two ways: both as a capitalized loss in rent, and as a capitalization of excess operating costs necessary to maintain the building in proper order. To determine the necessary calculation indicators (rental rates, capitalization rates, etc.), adjusted data on comparable analogues are used. In this case, the selected analogues should not have signs of irreparable functional wear identified in the object of assessment. In addition, the total income generated by the property complex (building and land) as a whole and expressed in rent must be divided into two components accordingly. To allocate part of the income attributable to the building, you can use the investment balance method for the building or the method of analyzing the ratio of the value of the land plot and the total sales price of the property complex.

External (economic) wear and tear

External depreciation is the depreciation of an object due to the negative influence of the external environment in relation to the object of assessment: the market situation, easements imposed on a certain use of real estate, changes in the surrounding infrastructure, legislative decisions in the field of taxation, etc. External wear and tear of real estate, depending on the reasons that caused it, in most cases is irreparable due to the unchanged location, but in some cases it can “remove itself” due to a positive change in the surrounding market environment.

The following methods can be used to assess external wear:

capitalization of rental losses;

comparative sales (paired sales);

economic life span.

The calculation of external wear and tear using the method of capitalizing losses in rent is carried out similarly to the calculation of functional irreparable wear and tear.