Ross Method
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ScribdTranslationsRoss - Heidecke Method
The Ross Heidecke method has been designed exclusively for
calculate the depreciation in the valuation of constructions, having as an advantage
about other methods, the consideration of their state of conservation;
allowing for a depreciation calculation that is more in line with reality.
This method is exclusive for the valuation of constructions and includes
two fundamental aspects that are depreciation by age and by condition.
This method considers the following basic principles:
Depreciation is a loss of value that cannot be recovered through expenses.
of maintenance.
Repairs can increase the durability of the good.
A well-maintained asset depreciates regularly, whereas
a Poorly preserved items depreciate more quickly.
Its depreciation formula (D) is as follows
D
1x
x 2
depreciation coefficient by state
2n n
Where
x = age of the construction
n = probable useful life of the construction
To directly determine the depreciated current value of a building
we must apply the following formula
VIRGINIA Vn1 x
1x
*E
2n n2
Where
PV = present value
Vn = new value for the building
x = current age
n = probable useful life
E = good factor
For the application of this method, ROSS HEIDECKE defines 5 categories.
of conservation statuses with four intermediate categories, attributing to
each of them eigenvalues; let's see the following table:
TABLE NO. 1 DEPRECIATION BY STATE
DEPRECIATION TABLE BY STATE
STATES1[1] PHYSICAL CONDITIONS CLASSIFICATION COEFIC.
NORMAL DEPREC.
NEW
1 Has not suffered nor needs Optimo-O 00
repairs
Very good-MB 0.032
REGULAR
2 Requires or has received Good B 2.52
minor repairs
Intermediate-I 8.09
3 Requires repairs Regular-R 18.10
Simple
Deficient-D 32.20
4 Requires repairs Bad-M 52.60
important
5 Requires a lot Very Bad-MM 72.20
important repairs
Value of Demolition-DM 100
Demolition
Definitions of the states:
The following are the concepts corresponding to the states used.
in the previous table, according to General Provision No. 1-2000, issued by the
Technical Standardization Body.
1[1]
The numbering of the ranges is for the purpose of the valuation program.
Optimo: A construction in optimal condition is one that has not suffered any
requires no repairs of any kind.
Good: A building in good condition is one that requires or has
received minor repairs, for example, repairs of
cracks in plaster, minor water leaks in pipes and
ceilings, changes in small sections of baseboards, frames of
windows or doors and others.
Regular: A construction in a regular state is one that requires
simple repairs, for example, painting, partial changes in
floors, ceilings, windows, and others.
Bad: A building in poor condition is one that requires
important repairs, for example, total replacement of cover,
floors, ceilings, mechanical installations, and others.
Very bad: A building in very bad condition is one that requires
many important repairs immediately and not
receive them in a short time, it will be in a state of demolition.
For the purposes of applying the Ross-Heidecke Method in the model of
valuation of constructions, only the states have been considered
previous statements, with the aim of simplifying the procedure.
To obtain the good factor (E), according to the coefficient of
Depreciation of the previous table must subtract the coefficient from 100.
corresponding and then divide the result by 100.
100 Depreciation Coefficient
E
100
Example
Determine the current value of a 15-year-old building, whose condition
conservation is GOOD, which has been determined to have a probable lifespan of 60
years and a new replacement value of ¢ 70,000.00 per square meter.
By applying the previous formula, we have
x
2
1x
VA Vn1 *E
2n 2
From the above
Vn = ¢ 70,000.00 /m²
x = 15 years
n = 60 years
E = good factor
According to the above table, the depreciation coefficient by state
it is 2.52:
100 2.52
E 0.9748
100
Consequently,
15
2
1 15
VA 70,000 1 0.9748
2 60
60
2
VA = ¢57,574.00/m²
Therefore, the current depreciated value per square meter for the building is
of ¢57,574.00 per square meter, according to the formula. However, the
The expert can round this value to ¢ 57,500.00 /m².