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 IV. Essentials of value

Collection:: Economics Books

74 VALUATION, DEPRECIATION AND THE RATE-BASE mission. The lessening of worth is offset, or at any rate is in- tended to be offset, by an increase of the earnings. Depreciation then appears on both sides of the account. The owner of the property if fairly treated is no better nor worse off in consequence of deteriorating articles because they are made good to him as they deteriorate. But appreciation is usually not estimated from year to year and is not therefore entered with the annual revenue. When the occasional appraisal discloses appreciation, it appears as a profit. The Interstate Commerce Commission regards it as income. The United States Supreme Court holds that the owner of the public utility is entitled to the appreciation unless the same is excessive in amount in addition to a fair re- turn upon what would, without the inclusion of appreciation, be the reasonable amount of capital invested. How much simpler it would be to grant to the utility some reasonable share in the gen- eral prosperity not measured solely by the increase in the value of the real estate which it happens to own and use in the public service. The Secretary of the Treasury of the United States in decisions relating to the income tax says: « Profits realized on the sale of real estate during the year, also increase of value of unsold property, if taken up on the books of the corporation, (are) to be included in income.” Appreciation and the Rate-Base. — In weighing the question whether or not appreciation is to be added to the rate-base, con- sideration may be given to the alternative of the rental value of equivalent property. Suppose for example that among the properties owned by a public utility there is a large tract of land located in a region in which real estate values are advancing normally. If instead of acquiring this land the owner of the utility had entered into a lease thereof based upon an agreement that the rent from year to year should be commensurate with a proper valuation of the land, the amount of the rent increasing from year to year would be included in the cost of operation and rates would be fixed as though, in the case of actual ownership, the rate-base had included appreciation.

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