What does the straight-line or age-life method of estimating depreciation assume?

The straight-line or age-life method of estimating depreciation operates on the principle that an equal portion of value is attributed to each year within the total economic life of an improvement. This method simplifies the calculation by assuming that the value of a property decreases uniformly over time.

By applying this approach, an appraiser estimates the total economic life of the property and then divides the total value by the number of years in its economic life. This results in a consistent annual depreciation amount, which is deducted from the total value for each year that the property is in use. This method is particularly useful because it models a steady, predictable loss in value, providing a straightforward way to assess depreciation.

In contrast, the other options introduce concepts that are not consistent with the straight-line method. For instance, the idea that depreciation varies yearly does not hold true under this method, as it assumes uniform depreciation. Similarly, the notion that improvements only depreciate after reaching a certain age does not align with the method's premise of consistent annual depreciation throughout the life of the asset. Lastly, while market fluctuations can influence value, the straight-line method does not account for these dynamics, focusing instead on a fixed rate of depreciation over time.