Depreciation Reserve Research Articles

Historical aspects and the current problems of accounting for fixed assets depreciation

Subject. This article conducts historical research to substantiate the organizational and methodological aspects of accounting for the creation and use of depreciation funds in the form of a depreciation reserve. Objectives. The article aims to analyze the procedure for the formation of the depreciation fund as the main source of financing the receipt and creation of fixed assets, as well as the depreciation of fixed assets in the Soviet period, and identify the problems of financing investments in non-current assets in the modern accounting system. Methods. For the study, we used analysis, synthesis, systematization, and generalization. Results. The article identifies the problems between investments in non-current assets and the sources of their financing in the Russian accounting system and shows the logical linkage and sequence of actions of the accountant, leading to an effective system of management of capital investments and their sources in practice. Conclusions and Relevance. The conducted historical research and analysis of current organizational and methodological aspects of accounting for depreciation of fixed assets reveals the need to introduce accounting for the creation and use of a depreciation fund in commercial organizations. The results of the study can be applied in the theory and practice of financial accounting and reporting.

Investments in the reproduction of fixed assets of agriculture

Fixed assets are considered to be a part of the property used as means of labor in the production of products or services or for the management of the organization for a period exceeding 12 months. The problem of investing in fixed assets is manifested in the development of investment activities, in the lack and high cost of the necessary sources of investment, in the need for the implementation of economic projects and programs, in the choice and making of effective investment decisions aimed at the reproduction of fixed assets in agriculture in Russia. The increase in the cost of fixed assets will be followed by an increase in payments in the form of the property tax to the budget. The increase in profits will also entail an increase in the amounts charged to businesses as taxes. In this case, there is a direct interest of the state. Thus, the expansion of the opportunities for an investment tax credit for the renewal of fixed assets will allow not only to increase payments to the budget but also to form its own source of investment activity at the enterprise in the form of a depreciation reserve.

THE IMPLICATIONS OF ROBOTICS AND ARTIFICIAL INTELLIGENCE FOR ECONOMIC GROWTH

The Industrial Age, which humanity entered long ago with the invention of the steam engine, resulted in the introduction of primitive mechanization into the manufacturing process. Electronics, nanotechnology, advances in medicine, health, and digital applications, among other things, are accelerating the study of mechatronics today, thanks to the development of the internet and mobile technologies. Robotics and artificial intelligence occupied a prominent position on the agenda of the last World Economic Forum, and economists such as Roubini and Stiglitz participated in the discussion of how robotics and artificial intelligence will impact the economy and business. However, even though Stephen Hawking has expressed concern about the risks involved in this regard, we are witnessing tremendous news and articles in business pages daily regarding these topics, and corporate life and professionals are no longer able to resist these changes. The changing nature of business terms and work forces, as well as the way businesses are conducted in the age of new technologies, will have significant implications for daily business life, as well as for the economies of individual countries and the global economy. The advancements in Artificial Intelligence will have a significant impact on many items and headlines in business and economics such as the jobless ratio, the Philips Curve, performance management, Analytics customer relationship management, sales and strategic planning mass production, Purchasing Power Parity (gross domestic product, inflation, money, Central Banks banking system, coaching training, accounting taxes, and many other items and headlines. One simple example can help to illustrate the magnitude of these ramifications: Would you recommend that the company maintain provisions for severance pay for its employees or that we calculate a reserve for depreciation / amortization for its robots? Would you recommend that we keep the term human resources in the title of the company's balance sheet, or would you recommend that we remove it entirely the purpose of this conceptual and hypothetical paper is to address and discuss the future of robots, mechatronics, and artificial intelligence from a variety of viewpoints and perspectives.

Issues in selecting profitability indicators for the evaluation of corporate financial performance

The article analyses the selection of profitability indicators for the evaluation of corporate financial performance. Both theory and practice, address a variety of profitability indicators, therefore, it is essential to understand the possibilities of using the information they provide, as well as to be able to identify potential reasons of indicator value deviations, and to assess the conditions causing the analysis performed based on these indicators to provide incomplete or unreliable information. The aim of the study is to analyse the main profitability indicators, their potential disadvantages, and possible issues in the analysis and interpretation of these indicators. Methods of logical and comparative analysis of the scientific literature, synthesis and generalisation, statistical data analysis and interpretation were used in this article. The results of the analysis show that there is no universal profitability indicator, that would cover all areas of company performance, because profitability indicators’ reliability, as well as objectivity of comparison to other entities, are influenced by national accounting standards, different prime cost calculation methods, long-term assets depreciation methods, reserve assessment, and other methods.

Theory of tax variation calculation

The government plays a primary role in developing the national economy. Using management tools, the government can stimulate certain areas of economic activities. Productivity, an increase in fixed production assets, jobs depend on stimulation and management tools used by the government. The article examines mechanisms that encourage businesses to improve qualitative and quantitative parameters of their fixed assets rather than to use their depreciation reserves. The method presented in the article takes into account interests of both the government and the economic entity. This method can help identify an optimal period for the residual value of fixed production assets.

Political Corruption and Accounting Choices

We examine how political corruption affects firms’ accounting choices. We hypothesize and find that firms headquartered in corrupt districts manipulate earnings downwards, relative to firms headquartered elsewhere. Our finding is robust to alternative corruption measures, restatement-based earnings management measures, and the instrumental variable approach. Consistent with the motive to depress earnings, we find that firms headquartered in corrupt districts prefer LIFO over FIFO, and the accelerated depreciation method over the straight-line method, they report high LIFO reserve and depreciation reserve, and they tend to select a low useful life estimate. Finally, we find that the effect of corruption on earnings management is more pronounced for geographically concentrated firms and for firms without political connections. In sum, our findings suggest that firms respond to corruption by lowering their accounting earnings.

Formation of reserves to cover loss from depreciation of stocks of retail trade enterprises

Nowadays, the most significant and widely researched accounting innovation is forming the reserve system of a business unit under conditions of sustainable development. The research proves the necessity of forming the reserves as an element of a business unit protection from the risks to lose economic profits because of assets depreciation. It is proposed when making a decision about the formation of the reserve to protect stocks from depreciation, to take into account the level of essentiality not only the deviation size of actual cost of goods from their market cost, but also the level of essentiality of the deviation of actual commodity turnover from its planned significance. The authors develop the algorithm for the level of essentiality assessment when forming the reserve of depreciation of stocks for trade enterprises, which actualizes two indices, namely, the relative deviations of commodity turnover and the cost of goods and allows to make decision about formation of reserves for decreasing the cost of capital equipment including essentiality. The research determines the main factors of influence on the depreciation of the stocks under conditions of continuity, they are: the change of assessment of stocks because of the events after report date, the methods of determining the risk of stocks, moral depreciation and quality loss. To provide the continual cycle of replenishment of commodity stocks for a trade enterprise the authors develop the diagram of accounting process for the formation and use of the depreciation reserve of stocks.

ANALISIS POTENSI RASIO CAMEL SEBAGAI INDIKATOR SINYAL KONDISI BERMASALAH BANK PERKREDITAN RAKYAT KONVENSIONAL DAERAH ISTIMEWA YOGYAKARTA

The study was conducted to determine the potential of camel ratio as an
 indicator of signal problematic conditions of Conventional Rural Bank in Yogyakarta Special Region. The data used are all the Performance Rural Banks operating in 4 (four) districts and 1 (one) city of Yogyakarta, which is listed on the Bank of Indonesia. Due dependent variable is nominal data, then test of hypothesis is done using logit regression analysis model. The results provide evidence that: Adequacy Capital Ratio (Zstatistics = -5.4477; sig. = 0.0000) as a proxy for capital potentially significant factor as an indicator of signal problematic conditions; Non Performance Loan (Z Statistics = 6.3545; sig. = 0.0000) and Depreciation Reserve of Productive Assets (Z Statistics = 3.6966; sig. = 0.0002) as a proxy for asset quality factor potentially significant as an indicator of signal problematic conditions; Profit Margin (z Statistics = -1.3183; Sig. = 0.1874) as a proxy for management factor and Return On Assets (z Statistics = 0.1402; sig. = 0, 8884) as a proxy for earnings factor is not significant as an indicator of potentially problematic conditions signal; and Loan to Deposit Ratio (z Statistics = - 4.3700; sig. = 0.0000) as a proxy for liquidity potentially significant factor as an indicator of signal problematic conditions.

The Impacts of Robotics, Artificial Intelligence On Business and Economics

In the Industrial Age that humanity has entered long time ago with steam series has caused to primitive mechanization in production. With the development of internet and mobile technologies, electronics, nano technology, advances in medicine, health and digital applications and so on speed up mechatronics studies nowadays. Last World Economic Forum holds an important place on the agenda of Robotics and Artificial Intelligence and the economists like Roubini, Stiglitz also entered in the discussion of robotics and artificial in intelligence impacts on economics and business. Although Stephen Hawking criticized on the risks in this regard, every day we are witnessing tremendous news and articles in business pages, regarding on these topics and obviously corporate life and professionals can no longer resist to these changes. Changing form of the business terms and work forces, the way of doing business by using new technologies will have serious impacts on the daily business life and deriving from these on countries and on world economics. Many items and headlines such as jobless ratio, Philips Curve, performance, management, CRM Analytics, customer relationship management, sales, strategic planning, mass production, Purchasing Power Parity, GDP, inflation, money, Central Banks, Banking System, coaching, training, accounting, taxes etc. regarding to business and economics will face serious dangers, hits, change, exposures as well as opportunities and gains with the improvements in Artificial Intelligence and Robotics. One simple example can explain the degree of these impacts: Should we continue to make provisions for severance pay of the company's staff or should we calculate reserve for depreciation / amortization of robots in the company, which side of the balance sheet will be managed by human resources managers or shall we still name human resources ? This conceptual and hypothetical paper is aiming to address and discusses the future of robots, mechatronics and artificial intelligence in different perspectives.

Bad Bank(s) and Recapitalization of the Banking Sector

With banking sectors worldwide still suffering from the effects of the financial crisis, public discussion of plans to place toxic assets in one or more bad banks has gained steam in recent weeks. The following paper presents a plan how governments can efficiently relieve ailing banks from toxic assets by transferring these assets into a publicly sponsored work-out unit, a so-called bad bank. The key element of the plan is the valuation of troubled assets at their current market value - assets with no market would thus be valued at zero. The current shareholders will cover the losses arising from the depreciation reserve in the amount of the difference of the toxic assets' current book value and their market value. Under the plan, the government would bear responsibility for the management and future resale of toxic assets at its own cost and recapitalize the good bank by taking an equity stake in it. In extreme cases, this would mean a takeover of the bank by the government. The risk to taxpayers from this investment would be acceptable, however, once the banks are freed from toxic assets. A clear emphasis that the government stake is temporary would also be necessary. The government would cover the bad bank's losses, while profits would be distributed to the distressed bank's current shareholders. The plan is viable independent of whether the government decides to have one centralized bad bank or to establish a separate bad bank for each systemically relevant banking institute. Under the terms of the plan, bad banks and nationalization are not alternatives but rather two sides of the same coin. This plan effectively addresses three key challenges. It provides for the transparent removal of toxic assets and gives the banks a fresh start. At the same time, it offers the chance to keep the cost to taxpayers low. In addition, the risk of moral hazard is curtailed. The comparison of the proposed design with the bad bank plan of the German government reveals some shortcomings of the latter plan that may threaten the achievement of these key issues.

Fixed Asset Accounting in the Shipping Industry: P&O 1840–1914

The Peninsular & Oriental Steam Navigation Company (P&O) was one of the most important British shipping companies in the nineteenth and twentieth centuries. The extensive P&O archives reveal the evolution of the company's methods of accounting for its fleet of merchant ships, from an initial arbitrary depreciation reserve fund, through relatively systematic application of the reducing balance method, to a rigid adherence to straight line depreciation. P&O saw depreciation largely as a source of internally generated funds for asset replacement, and secondarily as a means of dividend smoothing. The latter objective was also achieved through the use of a secret reserve. P&O's accounting methods were rarely innovative, but taken together they epitomize the ‘best’ accounting practices of their day.

一九二〇年代における日本電力の自立的発展

Nippon Electric Power Co. Ltd. (Nippon Denryoku) was founded after World War 1 as a subsidiary of Ujigawa Electric Power Co. Ltd. (Ujigawa Denryoku), with the intention that its main business would be the supply of wholesale electricity to Ujigawa.However, Ujigawa decided to go into partnership with, and to buy electricity from, Great Consolidated Electric Power Co. Ltd. (Daido Denryoku), which had completed electric power transmission facilities to Osaka before Nippon Electric, and so Nippon Electric lost its largest customer. It was forced to seek other purchasers for its electricity to replace Ujigawa and, undertaking a positive sales drive, found customers in Osaka, Hyogo, Kyoto, Aichi and Toyama Prefectures.As a result of this Nippon Electric was able to break away from its parent company and become independent. The main reasons for its growth were the low price of the electricity it supplied and the rapid expansion of the power supply market in the 1920s caused by the electrification of industry.However, in the process of becoming independent Nippon Electric practiced unrealistic financial management, letting for example its depreciation reserve become insufficient, and consequently in the Showa depression which followed, the company found itself in a serious crisis.

Equal Life Group Method of Depreciation: Part II Straight-Line Method of Cost Allocation for Integrated Properties

ABSTRACT The Equal Life Group Plan (E.L.G.).is the ultimate refinement of the straight-line method of depreciation-rate determination. The straight-line method is designed to spread the cost of property as equally as possible year by year over its useful life. As usually interpreted, this means that an average depreciation rate is intended to be used throughout the life of a group of property units. The trend has been toward more and more groups, until now a group is often a vintage group, i.e., the property of a given class installed in one year. If one average rate is applied to a vintage throughout its life span, only a part of the cost of short-lived units will be recovered during their lives. The shortage is made up during the life of the surviving units, but it is not fully made up until the year when the last surviving unit of the vintage is retired. What this means is that the depreciation reserve never reaches a ratio to plant in service as the age-to-life ratio of the plant. The E.L.G. plan is designed to overcome this difficulty. Basically, it is a procedure which has the effect of charging to operations the cost of short-lived units during their life, and of longer-lived units during their life. In short, the cost of each unit is charged to operations during its expected life. Thus the depreciation reserve at all times should have a ratio to plant investment equal to the age-to-life ratio of existing plant. In practice, the E.L.G. depreciation rate for a vintage of plant is determined very easily if studies are available which provide a sound basis for estimating the age of distribution of retirements for a vintage of plant. Such a distribution means that the vintage is divided into groups, as many groups as there are years expected for the life of the longest-lived unit in the vintage. This breakdown, of course, is statistical, because no one knows which units will have each of these lives-- but the percentage falling into each age group can be estimated accurately enough for this purpose. The depreciation rate for the vintage is simply the summation of the products of these percentages and their respective component depreciation rates. The rate for each component is the reciprocal of its life, modified, if necessary, by its expected net salvage.

Equal Life Group Method of Depreciation: Part I Equal Life Group Plan of Depreciation Rate Determination

Abstract The Equal-Life Group Plan (E.L.G.) is the ultimate refinement of the straight-line method of depreciation-rate determination. The straight-line method is designed to spread the cost of property as equally as possible year by year over its useful life. As usually interpreted, this means that an average depreciation rate is intended to be used throughout the life of a group of property units. The trend has been toward more and more groups, until now a group is often a vintage group, i.e., the property of a given class installed in one year. If one average rate is applied to a vintage throughout its life span, only a part of the cost of short-lived units will be recovered during their lives. The shortage is made up during the life of the surviving units, but it is not fully made up until the year when the last surviving unit of the vintage is retired. What this means is that the depreciation reserve never reaches a ratio to plant in service as the age-to-life ratio of the plant. The E.L.G. plan is d...

Depreciation Reserves and their Economic Consequences

THE excess of depreciation reserve over the replacement needs is a constituent of the national income that eludes even the fastidious grip of the national income accountant. For an individual firm, depreciation reserves are not an income. But for&growing economy as has been demonstrated by Domar E.D., a portion of it is in the nature of income which can be used either for consumption or investment purposes. The greater the rate of growth, the higher proportion of depreciation reserves in the nature of income.

Property in Work

In the face of rising concern over the obsolescence and displacement of skill, there have been some proposals to compensate disadvantaged workers not only for current wage loss but also for the destruction of valuable rights in the job. The authors of such a proposal often argue their case on the ground that there is inequity in the treatment of the owners of human capital as compared with the owners of physical capital. Through the accumulation of depreciation reserves, the latter are compensated for the destruction of capital values, but no similar provision is made for the former group. This brief discussion presents a skeptical view of such an argument for compensating the loss of job property rights. (Author's abstract courtesy EBSCO.)

Rate‐Making Regulations and Financing in West Virginia

West Virginia, instead of allowing a fair rate of return (as is done for privately owned utilities), allows a municipally owned utility to charge rates broad enough to produce sufficient funds to pay reasonable operating expenses (including depreciation), to service debt capital, and to provide sufficient surplus for needed additions or replacements. One of the major difficulties encountered by West Virginia in the regulation of municipally owned water systems has been the failure of the utilities to set aside a sufficient depreciation reserve to enable them to make replacements made necessary by the wearing out or obsolescence of equipment or facilities. It should be pointed out that under West Virginia law, funds generated by a municipal corporation's operation of utility services may not legally be expended for any purposes other than those directly related to the operation of the utility. Accounting records, rate‐making procedures and financing of improvements are also discussed.

Federal Financing of Rural Utilities

IHE PROVISION of electric and telephone service to the rural areas of the United States has presented problems of financing for more than 50 years. The extent to which rural utility services are economically feasible has been a matter of continuing controversy. Demands for service have consistently been ahead of the availability of private capital to finance rural expansion. The comparatively higher costs of rural service and the lack of appreciation for the potential use of electric power and communication services by farmers sharply retarded early development. Many small companies, self-service organizations, and municipal systems developed to fill some of the demands. The financing of most of the early rural telephone service was done by local subscription and small stock companies. Organizations were crudely established, few were incorporated, and little attention was given to longterm needs. Depreciation reserves, bookkeeping, and other requisites of good management were practically nonexistent. Although some educational assistance was offered by the U.S. Department of Agriculture,1 the depression of the 1930's, obsolescence, and the lack of maintenance led to the rapid deterioration of many rural telephone systems and farmer lines. Central station rural electric service was slower to develop than rural telephony. Technical progress did not make long distance transmission and rural distribution of electric energy feasible until after the turn of the century. Except for irrigation pumping in certain localities and occasional rural industries, it was felt that farmers would use electricity only for lighting. Consumption was not expected to justify the cost. Industry leaders apparently were prone to judge the potentials of rural service too much in terms of urban costs and returns. As has been noted in more recent years, they failed to anticipate the potential utilization of power on farms; they were too fearful of farm depressions that would ruin their investments, and construction standards were too rigid to permit lowering costs. As a result, the capital contributions required for the provision of service stymied any substantial expansion. Although a few small rural companies and cooperatives were organized, only minor progress was made toward farm electrification. The result was that only

The Effect of Inflation on the Stock Market

I NFLATION IS A STORY we are constantly rehearing. In 1947-49 we heard that non-recurring inventory profits and inadequate depreciation reserves for replacement of assets had resulted from inflation, so that earnings were over-stated and ought to be discounted. An average priceearnings ratio for the Standard & Poor's Industrial Index of 19.0 in 1946 declined to 9.8 in 1947 and to the abnormally low level of 7.7 in 1948, because of investor recognition of inflation. This cause was cited until recently to justify the abnormally high price-earnings ratio for this Index of 13.6 in 1956 and 13.65 in the last week of August, 1957. Is there no rational way to allow for the effect of inflation on the value of stocks?

Trusts: Improved Real Estate: Validity of Depreciation Reserves

Trusts: Improved Real Estate: Validity of Depreciation Reserves