In asset appraisal, the methods of estimating substantial depreciation include observation method, service life method and repair cost method.

First, the observation method:

For large equipment, Delphi method and fuzzy comprehensive evaluation method can be used.

Second, the service life method:

Real depreciation rate: α p = l1/l;

(l 1- service life; L- total service life);

If the residual rate of equipment is △, the calculation formula is:

αp = l 1/l×( 1-△)；

Third, the repair cost method:

Assuming that the physical loss of equipment can be compensated, the expenses incurred to compensate (repair) the physical loss are the physical depreciation of equipment.

Compensatable (repairable) loss refers to the loss that can be repaired by technically and economically feasible methods.

Unrecoverable (irreparable) loss: economically speaking, repair is uneconomical or this loss is technically irreparable.