Generally accepted depreciation methods do not factor in the Time Value of Money, despite the concept being a core principle of financial asset valuation . By applying the concept to depreciation, Depreciable Asset Value Models can be formulated , that allow depreciation to be calculated in a manner consistent with financial theory. While the Basic Depreciable Asset Value Model formulated withinhas its limitations, more complex models , which factor in a greater number of variables, can be formulated using its logic .
Generally accepted depreciation methods do not compute the intrinsic value of an asset, as they do not factor for the Time Value of Money, a key principle within financial theory. This is disadvantageous, as knowing the intrinsic value of an asset can assist with making effective purchase and sale decisions . By applying the Time Value of Money principle to deprecation and book valuation, methods can be formulated to approximate the intrinsic valuation of a depreciable asset, which improves the capacity for buyers and sellers of assets to make rational decisions. A deprecation method is formulated within, which aims to better match book value with intrinsic value. While this method makes many assumptions and thus has limitations, more complex formulas , which factor for a greater number of variables, can be created using a similar approach, to produce better approximations for intrinsic value .
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to approximate the intrinsic valuation of a depreciable asset, which improves the capacity for buyers and sellers of assets to make rational decisions. A deprecation method is formulated within, which aims to better match book value with intrinsic value. While this method makes many assumptions and thus has
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