Final answer:
Depreciation for appraisal purpose is calculated as part of the cost approach and involves estimating the current market value by adjusting the replacement cost with accrued depreciation. It differs from tax depreciation and does not use a fixed formula or remaining useful life of 40 years.
Step-by-step explanation:
Depreciation for appraisal purpose refers to the calculation of the loss in value of an asset over time for the purpose of determining its current value, often in the context of real estate appraisal. Unlike depreciation for tax purposes, which often has strict guidelines set by tax authorities, depreciation for appraisal is computed as part of the cost approach. This method involves estimating the replacement cost of the property as if new, then deducting the accrued depreciation of the physical, functional, and external obsolescence to arrive at the current market value. The calculation of depreciation for appraisal does not follow a standard formula and is instead based on the assessor's judgment regarding factors like the condition of the property, local market trends, economic conditions, and the remaining useful life of the property, which may not necessarily be a fixed period such as 40 years.