What is the appropriate method for calculating a capital asset impairment associated with obsolescence?

The appropriate method for calculating a capital asset impairment associated with obsolescence is the service units approach. This method focuses on the actual service potential of an asset based on its use, rather than on its market value or replacement cost. When an asset becomes obsolete, its ability to generate future economic benefits may decrease, and the service units approach effectively quantifies this reduction by evaluating how much of the asset's capacity can still be utilized over time.

This method encourages a direct assessment of the asset's usage rather than relying on external market factors, making it suitable for cases of obsolescence, where assets may still serve a purpose, but not as effectively or efficiently as before.

In contrast, the other methods, while relevant in other contexts, are less applicable for assessing obsolescence. The restoration cost approach typically estimates the cost to restore an asset to its original condition, which may not capture the effects of obsolescence accurately. Similarly, the deflated depreciated replacement cost approach considers the cost to replace the asset, adjusted for depreciation, but can overlook the specific service capabilities and utility of an obsolete asset. Thus, when assessing impairment due to obsolescence, the service units approach provides a clearer, more focused method of determining the reduction in an