- obsolescence
- A fall in the value of an asset as a result of its age. For example, plant and equipment may not have actually worn out but may have become out of date because technology has advanced and more efficient plant has become available. It also applies to consumer durables (see consumer goods), in which a change of style may render a serviceable piece of equipment, such as a car or washing machine, out of date. In accounting, obsolescence is an important factor both for depreciation of fixed assets and for valuation of stock. Built-in obsolescence or planned obsolescence is a deliberate policy adopted by a manufacturer to limit the durability of a product in order to encourage the consumer to buy a replacement more quickly than he or she otherwise might have to. The morality of this policy has been frequently questioned but is usually defended on two grounds. Firstly, in the modern world, the pace of technological improvement is such that many consumers will choose to buy new computers, CD players, etc. , before their existing models have worn out. In these circumstances, it makes sense for manufacturers to produce cheap products that will function well for a fairly short period rather than more expensive ones that will function long after they have become technically obsolete. Secondly, Western economies depend on strong consumer demand; if such consumer durables as cars and washing machines were built to last for their purchaser's lifetime, demand would be reduced to a level that would create enormous unemployment.
Big dictionary of business and management. 2014.