Functional impairment refers to the popularization and application of new technology, which makes the original assets of enterprises obviously backward in technology, lower in performance and lower in value compared with those widely used in society. This kind of loss is called functional loss of assets, also called functional depreciation.

Functional depreciation calculation:

1, functional depreciation estimation caused by excess investment cost

Due to the changes and improvements in layout, design, materials, product technology, manufacturing methods, equipment specifications, configuration, etc. caused by new technology, the investment cost of purchasing and building new equipment is lower than that of old equipment, thus forming the functional depreciation of the original equipment. The functional depreciation caused by the excess investment cost is equal to the difference between the repair and replacement cost of the equipment and the replacement cost of the equipment.

Functional depreciation = equipment repair and replacement cost-equipment update and replacement cost

In the evaluation, if the recovery replacement cost is adopted, it is necessary to consider whether there is functional depreciation caused by excess investment cost. If the estimated replacement cost is the replacement cost, then the excess investment cost included in the evaluated equipment value has actually been eliminated, so there is no need to deliberately find the repair and replacement cost of the equipment, and then subtract the differential investment cost of the equipment. Therefore, when selecting the replacement cost, when both the repair replacement cost and the update replacement cost are available, the update replacement cost should be selected.

2. Functional depreciation estimation caused by excess operating costs.

The excess operating cost is due to the development of new technology, which makes the operating cost of new equipment lower than that of old equipment. Functional depreciation caused by excess operating costs is also the discounted value of future excess operating costs of equipment.

To analyze and study the excess operating cost of equipment, the following factors should be considered: whether the production efficiency of new equipment is higher than that of old equipment; Whether the maintenance cost of the new equipment is lower than that of the old equipment; Whether the material consumption of the new equipment is lower than that of the old equipment; Whether the energy consumption of the new equipment is lower than that of the old equipment; Compared with the old equipment, whether the new equipment reduces the operation workload, and so on.

The steps for calculating functional depreciation caused by excess operating costs are as follows:

① Analyze and compare the excess operating cost factors of the evaluated machinery and equipment;

② Determine the acceptable service life of the evaluated equipment and calculate the annual excess operating cost;

③ Calculate the net excess operating cost;

④ Determine the discount rate and calculate the discounted value of excess operating costs.