OBSOLESCENCE AS A FACTOR IN THE DEPRECIATION OF CONSTRUCTION EQUIPMENT

Abstract : A study is presented of the effects of equipment obsolescence on ownership policy, particularly as it affects the construction industry. First, it was necessary to determine present industry practices in recognizing and treating depreciation and, in turn, obsolescence, which is a factor in depreciation. An industry survey to determine these practices was conducted. The problem was then approached from a theoretical point of view to sift out the various economic effects of technological improvement. These were translated into new mathematical theory to express the interrelation of obsolescence, inflation, and other economic factors and to appraise their influence on the economic life of construction equipment. This theory not only serves to explain present practices in equipment ownership, but will be useful in predicting what may happen in the future. After the mathematical development of an obsolescence theory, the costs of owning and operating a crawler tractor in the 200 horsepower class were fed into the computer program. Results showed that the economic life of the crawler tractor was shortened by the pressure of technological improvements in replacement machines. (Author)