What can you do to prevent the depreciation of physical assets?

Question

Depreciation of physical assets is the normal wear out of the usefullness of equipments, buildings, structures for economical uses. Example, a factory will need to replace all its machineries and equipments to cope up with new technology for better production....So to avoid deppreciation, we must pursue appreciation so that we can still make use of them. Appreciation includes MAINTENANCE-Repair, Replacement...and INVESTMENT. Can you elaborate more from these topics and sub topics?

Answer 1

1. You can't avoid depreciation.

2. Maintenance and repair are operating expenses. There's not a connection with depreciation.

3. In order to replace a fixed asset you must dispose of all the obsolete assets first.  The new assets have to be depreciated too.

Answer 2

Sorry, you cannot 'prevent' depreciation of physical assets.  The best you can hope to do is to prolong the useful life of these assets by sound maintenance and repair practices.  The major reason for 'depreciation' is for accounting purposes.  When a firm spends on physical assets, the expense not taken all at once to the income statement, but is spread out over the useful life of the asset.  The 'useful' life of individual asset is determined by the asset class and not by the real asset life - a majority of physical assets are in use well beyond their "useful life".  In the world of accounting,  'depreciation' is actually a good thing as it tries to match the use of the asset over a long time to production and should not be (and really can't be) avoided.

Answer 3

by careful management of

precautional measures and

procedures for the same.

Answer 4

Depreciation of physical assets can be divided into two categories: The physical depreciation of the assets meaning their wear and tear and the economical depreciation of physical assets, meaning the percentage of their value you can claim yearly on your income tax returns. Example: You own a car, according to income tax tables you are permitted to depreciate the car each year at, let's say 15% of its book value so each year you can claim and expense of 15% until after 6.5 years the book value is 0 and you can't claim any more depreciation.

The car, if well maintained against physical depreciation, may still run perfectly but economically, it's almost a non-entity since you can't claim depreciation.

The clue then is to figure out when you up-keep expenses are becoming too big and at that stage, do the switch to a new car (or a new factory). When you switch, you start investing, for which you also can claim expenses. In the end it is really an exercise for the accountants who have to advise you when  it's worth while to switch and what expenses you can claim and how much depreciation you can claim. Usually, depreciation tables (how much an asset is allowed to depreciate by IRS) are some indication how long an asset is expected to last but since the government is usually behind, you often end up having depreciation tables that are longer (less percent per year) than in reality, a.e. the asset really depreciates a lot faster.

Go talk to an accountant about it.