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Bulletin HASKINS & SELLS 91 Not Altogether Clear IN reviewing the decision of the United States Supreme Court, under date of January 6, 1930, in the case of United Railways and Electric Company of Baltimore v. West, Chairman, et al (Public Service Commission of Maryland), one cannot help but be somewhat amused at an admission of uncertainty expressed in the decision of the Maryland Court of Appeals, from which decision the case went up, on appeal, to the United States Supreme Court. The admission is found in the following quotation: "Counsel for the commission suggests that to restore value would be to 'require the financing of additions to plant, to the extent of the excess of replacement over original cost of property replaced, by the public, which would in turn have to pay a return on the capital thus required.' The meaning of that suggestion is not altogether clear, but if it is that the company is entitled to the return of anything less than the value of its property it cannot be sustained. Money deducted from earnings to replace equipment which has become worn out or obsolete, by other equipment of the same character and the same value, adds nothing to the company's resources, but merely keeps them at the same level." The argument of counsel for the Commission is one of the best reasons yet advanced for replacement costs. If it is granted that the amount invested in five units of property on the basis of original cost will purchase but four units when the time to replace arrives, and the utility will at that time still require five units for efficient service, let the corporation then borrow, or increase its own capital investment accordingly. There can be no objection during the next depreciation cycle, under the original cost theory, which then will be applicable, to recovering the additional amount invested from recipients of service in that cycle. Ergo, why not extract, in advance, from the present generation, what it is estimated will be required sometime in the future? The decision of the Supreme Court of the United States is interesting, but long. The essence of the decision, from an accounting point of view, is found in the following: "In determining adequate rates for a
Object Description
Title |
Jack-straws |
Author |
Anonymous |
Subject |
Depressions -- 1929 -- United States |
Citation |
Haskins & Sells Bulletin, Vol. 13, no. 03 (1930 July), p. 093-094 |
Date-Issued | 1930 |
Source | Originally published by: Haskins & Sells |
Type | Text |
Collection | Deloitte Digital Collection |
Digital Publisher | University of Mississippi Libraries. Accounting Collection |
Date-Digitally Created | 2009 |
Identifier | hs bulletin 13-p91 |