Valuation, depreciation and the rate base

Bibliographic data

Monograph

Identifikator:: 174667931X

URN:: urn:nbn:de:zbw-retromon-119897

Document type:: Monograph

Author:: Grunsky, Carl Ewald http://d-nb.info/gnd/10180959X

Title:: Valuation, depreciation and the rate base

Edition:: 2. ed., revised and extended

Place of publication:: New York

Publisher:: Wiley

Year of publication:: 1927

Scope:: X, 500 Seiten

Digitisation:: 2021

Collection:: Economics Books

Usage license:: Get license information via the feedback formular.

Chapter

Document type:: Monograph

Structure type:: Chapter

Title:: Chapter II. Definitions

Collection:: Economics Books

28 VALUATION, DEPRECIATION AND THE RATE-BASE Overhead Expenses. — Certain expenditures in connection with the development and operation of any revenue-producing property are usually classed as overhead expenses. Econo- mists and engineers are not all agreed as to just what part of the cost of construction or operation should be classed as over- head. Ordinarily the cost of management is treated as the overhead. When work is done by contract, the amount paid to the contractor is the cost. An analysis of cost to the con- tractor when compared with what he has received may show a profit but this is no part of the overhead expense. The com- pensation of the general manager, on the other hand, and of the engineer and legal staff and the expense of the general office should be treated as overhead — so, too, interest during construction, taxes and insurance. Whether or not they are taken into account in making valuations for the purpose of establishing a “ rate-base ”” (it being no concern of the public how the funds for establishing an enterprise are raised), the commissions to brokers who sell bonds are a real item of ex- pense to the owner and will be classed by him either among the overhead expense or as a promotion expense. Promotion Expense. — The term ‘promotion expense” is used to designate certain expenditures, which cannot well be included in the “ overhead ” nor yet in the legitimate cost of establishing the business. To this class of expenditures belong a variety of expenditures usually incurred prior to the perma- nent organization of the business enterprise and may include commissions to real-estate agents, and the various expenditures that have been incurred apart from actual cost in acquiring the properties forming the nucleus of the enterprise. Adver- tising and discounts and commissions to bond brokers may also be at times properly classed as promotion expense. The cost of bringing together the various fundamental properties into one holding, representing the result of the promoter’s activities, except to the extent that the cost of promotion work appears in enhanced value, is generally accepted as being covered by the item ‘ promotion expense.”

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