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Functional depreciation differs from physical depreciation in arising from

  • A.obsolescence or a change in requirements
  • B.wear and tear in service
  • C.corrosion and fatigue
  • D.accidental damage in operation

Answer: A

Correct answer: obsolescence or a change in requirements

Physical depreciation is the asset wearing out; functional depreciation is its ceasing to be worth using although it still works. A machine superseded by a faster one, or a plant sized for a demand that has changed, has lost value functionally. It is often the larger of the two and the harder to forecast.

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