Question

For what reasons are plant assets retired? Define inadequacy, supersession, and obsolescence.

Short answer

Answer

Assets are retired for one of two reasons: physical factors or economic factors—or a combination of both.

Step-by-step solution

Meaning of Depletion

The loss of natural resources as a result of access to them on a regular basis is called depletion.Hence, a company uses it when any kind of registered asset is involved, such as oil, coal, or gravel deposits.

Explaining reasons why plant assets are retired. Define inadequacy, supersession, and obsolescence.

Physical or economic factors—or a combination of both—are the causes of asset retirement. Wear and tear, decay, and casualty factors are all physical elements that prevent an item from working indefinitely. Economic considerations might be viewed as any additional limitation that arises to reduce an asset's service life.

Inadequacy, supersession, and obsolescence are three categories that some accountants try to classify economic issues into. Inadequacy is described as a circumstance in which an asset is no longer helpful to a company due to changes in the company's expectations.

A circumstance in which one asset is replaced because another asset is more efficient and cost-effective is known as supersession. When economic concerns are addressed, obsolescence is the catchall phrase that incorporates all other scenarios and is frequently referred to as the primary notion.