Dividends and depletion of wasting assets;

              Bulletin HASKINS & SELLS 13
Dividends and Depletion of Wasting Assets
WASTING assets have been defined as
"material assets, such as mines, which
diminish in value by reason of and com-mensurately
with the removal of their
product, or immaterial assets, such as
patents, which theoretically diminish in
value by reason of and commensurately
with effluxion of time." That is, they are
assets which must be consumed or depleted
in the course of business in order to produce
revenue. Although accountants may not
be in entire agreement as to whether depre­ciation
is an element of cost, they are
generally in accord in regarding depletion
as a part of cost. It is difficult to conceive
how depletion can be regarded as anything
else than a part of the cost of goods sold,
just as are royalties and raw materials con­sumed.
Notwithstanding the fact that depletion
is generally regarded as an element of
cost, certain state legislatures hold that it
is unnecessary to provide for depletion
before declaring dividends. Some states
which have enacted laws prohibiting the
payment of dividends without providing
for depreciation, have made exceptions in
the case of corporations operating wasting