Accrued depreciation is defined as which of the following?

• A. The annual decline in value due to aging of the structure
• B. The difference between the reproduction cost or replacement cost new of the improvement and the market value of the improvement, both measured at the date of appraisal
• C. The depreciation of land value due to zoning changes
• D. The difference between current cost to build and future sale price

Answer: (B)

Accrued depreciation reflects the loss in value of an improvement from its cost to replace or reproduce it today to what buyers currently value it for, as of the appraisal date. It is calculated as the replacement (or reproduction) cost new of the improvement minus the market value of the improvement, both measured at the date of appraisal. This captures depreciation due to physical wear, functional obsolescence, or external factors.

The other options don’t fit because they either describe a general aging decline without tying it to cost vs. value, focus on land (which isn’t depreciated in this context), or compare current construction costs to a future sale price (which isn’t the depreciation measure used in this definition).