One of the recurrent problems faced by accountants is to convince consumers of accounting data that depreciation expense is not a source of funds. The method in this article represents a rather complex and formalistic attempt to drive home an obvious point, but such a system of definitions seems in order, since, unless the author's experience has been unique, it appears that the absurdity of funds provided by depreciation expense has not always been self-evident.

This article comments on obsolescence accounting the background of the article titled "Conclusion of the Atlas Plywood Story," the appeared in the November 1958 issue of the "Journal of Accountancy." The following definitions of obsolescence are found in accounting literature: "This term obsolescence is usually defined broadly to embrace the entire effect of the progress of invention and technical improvement." And "obsolescence in the narrow sense represents the effect of inventions and technical developments upon plant assets in use." Here an asset is considered totally obsolete when its replacement is dictated by economic considerations. Partially obsolete is the state that exists when a replacement for an existing owned asset is made available, but economic analysis does not dictate replacement. That is, the inferiorities of the old asset in relation to the new are not material enough to war-rant the outlay for the new. The effects of technology may either be predictable or unpredictable at the time of asset acquisition. Predictable effects of technological change give rise to what is termed ordinary obsolescence; unpredictable change results in extraordinary obsolescence.