STATISTICAL ATTRIBUTES OF GROUP DEPRECIATION.
The article discusses the benefits of the statistical attributes of group depreciation. It has been argued in the article that the benefits of group depreciation go far beyond the bookkeeping simplification and its concomitant cost savings. Far more important are the statistical attributes of group depreciation that yield reliable information on the economic life of the assets included in the group. By means of finite Markov chains one can derive empirical probabilistic distributions of the age of the various assets, which should provide management with better data not only for asset depreciation, but also for maintenance, utilization and replacement of capital equipment. Once the transition probability-matrix is established and the initial aging of assets accomplished, data can be generated automatically for forecasts of retirements of assets, balances in the asset accounts and allowance for depreciation, as well as depreciation charges for each year over the forecasting horizon. The information generated can then be introduced and aid in the development of capital and cash budgets and forecasts.
- DOI
- 10.2308/tar-7100481
- Volume
- 37 (4)
- Pages
- 713-720
- Language
- en
- Export
- BibTeX
- Sources
- openalex crossref