Valuation, depreciation and the rate base

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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

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Document type:: Monograph

Structure type:: Chapter

Title:: Chapter II. Definitions

Collection:: Economics Books

DEFINITIONS : aggregate accrued depreciation of the individual items of which the plant is made up. “Amortization.” — In the sense used in this paper the term amortization applies to the retirement of capital. When an article is to be permanently retired from connection with a busi- ness and not to be replaced, the annual depreciation increment or the annual replacement increment allowed in the earnings becomes an amortization increment. Ordinarily a discarded article is replaced by a new one which will render equivalent or better service. The amount to be provided during the life of the article and made available at the time it goes out of use is, for all practical purposes, its re- placement cost, being the cost of installing an equivalent new article, less the residual value of the original article. The amount thus provided may be treated as amortization, but there is no need of doing so as will be fully explained. Depreciation. — Depreciation is the lessening in worth of any perishable article which takes place from use and advancing age. It is not solely due to inherent deterioration or to wear and tear but results, too, from the fact that owing to progress in the arts and sciences and methods of manufacture, an article may become obsolete and that due to growth of communities or other causes, appliances or structures may become inadequate and have to be replaced in the course of time by new ones better adapted to the requirements. Every circumstance tending to limit the term of usefulness of an article should be taken into account when its probable life or expectation and consequent rate of depreciation are to be determined. Annual Depreciation. — The annual depreciation or the cur- rent depreciation is the annual theoretical lessening in worth, expressed in money. Appreciation. — Appreciation is the increase in worth ex- pressed in terms of money. It applies not alone to real estate but to any article, structure or thing which increases in value due to general prosperity or to the more obvious cause of higher wages and greater cost of materials. 272

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