A New Approach to Depreciation
The author wishes to acknowledge the constructive comments he received on earlier drafts of this paper from Dr C. D. Green and Mr A. A. Lonie, both of the University of Dundee, and from many people who commented on his work during his visits to other U.K. universities, which were financed by the Carnegie Trust for the Universities of Scotland.
Abstract
This paper presents a new ‘matching’ based approach to depreciation that incorporates interest adjustments and generates accounting measurements that are consistent with the ex post Net Terminal Values of fixed assets. The method has been developed from the concept of Earned Economic Income by the application of concepts drawn from the existing literature. The calculations and ledger entries involved are illustrated in the appendices.
