Originally published:1978-06 as Research report (Lincoln College (University of Canterbury). Agricultural Economics Research Unit) ; no. 86 by Lincoln College. Agricultural Economics Research Unit.
More accurate valuation of fixed assets in the
Balance Sheet and calculation of depreciation in
current cost terms are aims of inflation accounting.
This report demonstrates which of the commonly used
traditional depreciation methods might best be adapted
to measurement of fixed asset values and current cost
depreciation under the guidelines established in the
Richardson Report. Also, depreciation allowances and
book values are compared for the proposed current cost
methods and the present historical cost system.
The comparison of methods (and rates) of
depreciation was made using a cross-section of tractors
and headers for which data was collected in a recent
survey of New Zealand wheat growers. The best method
and optimum rate of depreciation was defined on the basis
of minimum sums of squares of errors (SSE) between
assessed values and calculated book values.
This approach attempts to reconcile the accounting
and economic viewpoints with regard to measurement of
depreciation. The use of standard depreciation formulae
and indexed historical cost means that the results may
be useful for accounting purposes. However, since
depreciation is calculated by valuing assets first and
then computing the depreciation, the approach conforms
to economic theory.[Show full abstract]
![[PDF]](/themes/LURA/images/mimes/b_pdf.png "PDF file"){kind=small}
