065 DEGREE OF PREFERENCE


F: DEGRE DE PREFERENCE
S: GRADO DE PREFERENCIA


See UTILITY


066 DEPRECIATION


F: AMORTISSEMENT
S: DEPRECIACION


The COST of wear and obsolescence associated with implements,
machinery and structures over time. It is usually calculated on
an annual basis. If the cost of depreciation is thought to be
relatively constant in each period (year) (e.g. as in the case of
buildings), it is calculated by the "straight-line method" as:

 D = (PC 8V)/n

where D is the depreciation cost in each period, PC is the
purchase cost of the item, and SV is the salvage value of the item
when disposed of after its life of n periods. If the rate (rather
than the cost) of depreciation is thought to be relatively
constant over time (e.g. as in the case of machinery),
depreciation is calculated by the "diminishing balance method" as:


D = (PC)r
1


D = (B )r
2 1


D = (B
i i-1


and B = (PC-D )


and B = (B D )
 2 1 2


)r and B = (B D )
 i i-1 i


where Di is the depreciation in period i. r is the rate of
depreciation per period, and Bi is the depreciated value of the
item at the end of period i. The rate r is calculated as

 1/n
 r 1 tSV/PC)

Other variations of these methods of calculating depreciation are
dlso sometimes used. All the methods of calculation can only
provide an estimate of the cost of wear and obsolescence. In
small-holder farming, an element of judgement may be necessary in
that often it may be significant to allow for the depreciation of
what in other farming contexts would be regarded as only minor
items of equipment and treated as consumables.


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