CHANGES IN REAL ESTATE VALUE DYNAMICS DURING SERVICE CYCLES AS A SOURCE OF NEGATIVE PERIODIC PROPERTY DEPRECIATION
DOI:
https://doi.org/10.35774/jee2020.03.535Keywords:
Independent expert evaluation, market value, accounting, service life of an asset, operation and maintenance stages of asset life cycle, obsolescence, depreciation, Iowa curves.Abstract
Main methodological principles of mathematically describing the patterns of changes in the asset’s value/depreciation dynamics are studied in cases when economic measurements are performed by independent expert evaluation. The basic hypothesis suggests that for all tangible assets, which are characterized by redeemable depreciation, there is a possibility of negative periodic depreciation during short-term service periods when remedial and repair work to eliminate depreciation signs is carried out.
The most influential price-forming factors that determine the asset’s depreciation indexes and indicators of value dynamics over long periods are identified and analysed. It is shown that when this period is comparable to the asset’s service life, most of tangible assets are characterized by both positive and negative periodic depreciation indexes at separate times. It is noted that the models used in accounting documents do not describe the actual changes in the value dynamics, and amortization in particular, since they do not take into account the possibility of increasing asset value and periodic negative depreciation. A new kind of mathematical model is proposed that takes into account the opposite signs of periodic depreciation in the operation and service periods. It is proved that the actual indicators of fair market value and periodic depreciation indexes of these types of assets can be determined by performing periodic independent expert evaluation (revaluation).
JEL: C13; C49; E30; E37; O34; O47.
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