What method is typically used to determine the depreciation of an asset?

The method typically used to determine the depreciation of an asset is physical deterioration analysis. This approach entails evaluating the wear and tear that an asset experiences over time due to usage and aging. Physical deterioration refers to the loss of value of an asset that results from factors such as environmental exposure, inadequate maintenance, and general use, which can lead to a decline in its functional or economic utility.

Physical deterioration analysis helps appraisers quantify how much value has been lost in the asset compared to its original value. It is essential for accurately assessing the current worth of personal property, especially in contexts where age and condition significantly influence an asset's marketability and value.

While other methodologies, like market comparison or replacement cost analysis, can offer insights into an asset's value, they do not specifically target the impact of physical wear on value. Present value calculations revolve around future cash flows rather than addressing the actual physical state of the asset, making physical deterioration analysis the most direct and relevant method for determining depreciation based on tangible conditions.