DEPRECIATION ACCOUNTING IN UTILITIES.
For a continuing enterprise having properties, the bulk of which must be replaced at one time, there is little doubt that funds roughly equivalent in amount to the recovered funds impounded by depreciation charges may be necessary for replacement. Nevertheless, as has been emphasized many times, replacement for a concern which continues indefinitely is done piece-meal and at no time in the future will all of the recovered funds represented by depreciation reserves on diversified properties be necessary for maintaining the same volume of output. A large volume of funds are, therefore, accumulated which are not only unnecessary in the intervals between individual replacements but are, in fact, never required by the firm unless it wishes to expand its productive capacity. With regard to public utilities one of the fundamental problems is the determination of the rate base. Except for considerations of working capital one shall assume that the rate base coincides with the accountants' book values. A minimum level of working capital is necessary and generally allowable.
- DOI
- 10.2308/tar-7038761
- Volume
- 18 (1)
- Pages
- 1-9
- Language
- en
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