Values sound and otherwise;

              66 HASKINS & SELLS September
Values Sound and Otherwise
CLEOPATRA, made a prisoner by
Octavius, submitted to her captor
a statement of her possessions, telling him:
"This is the brief of money, plate, and jewels,
I am possess'd of: 'tis exactly valued;
Not petty things admitted."
It would be interesting to know how
Cleopatra arrived at the exact values of
the items listed in her brief. The basis
of valuation was not stated. Perhaps
some idea might be gathered from the
ensuing dialogue between the queen and
her treasurer, as related by Shakespeare:
Cleopatra: "This is my treasurer: let him
speak, my lord,
Upon his peril, that I have reserved
To myself nothing. Speak the truth, Seleu-cus.
What have I kept back?"
Seleucus: "Enough to purchase what you
have made known."
Much has been done since the time when
Antony and Cleopatra dreamed away an
empire, by way of developing the theory
of value and defining bases for the val­uation
of various goods for different pur­poses.
It is not to be presumed, however, that
one common basis of valuation has come
to be accepted and utilized generally by
business men in recording financial trans­actions
and in preparing financial state­ments
setting forth the condition of their
enterprises. A study of a number of bal­ance
sheets undoubtedly would disclose
the fact that several methods of valuation
are in common use, even in the case of
similar items—some sound, and some
perhaps otherwise.
The valuation of fixed assets is a case in
point. Fixed assets consist among other
things of property such as land, buildings,
machinery, and sundry equipment, which
provide a concern with a place wherein to
carry on its operations and the mechanism
wherewith to produce and sell its products.
These items are termed fixed inasmuch as
they are not consumed in one operation, but
continue in use for a length of time—in­definitely
in the case of land. Their cost,
in the case of depreciable items, is spread
over several fiscal periods. The extended
period of their life, during which condi­tions
change and prices fluctuate, gives
rise to the question of how they should be
valued from one period to another.
A familiar basis of valuation of such
fixed assets is cost. As to land, cost means
original purchase price, plus expenses in­curred
in effecting the purchase, plus such
subsequent improvements as may properly
be capitalized.
In the case of buildings, machinery, and
equipment purchased or erected on con­tract,
cost consists of original purchase
contract price and all expenses connected
therewith, plus such additional expenditures
as are necessary to render the buildings fit
for occupancy or the machinery and equip­ment
available for use, plus the cost of
subsequent additions by way of improve­ments
and betterments.
Cost, in the case of buildings and
machinery constructed by the concern
which is to make use of them, consists of
materials and labor required, and other
expenses, such as architects' fees, directly
connected with such construction. Ortho­dox
accounting theory frowns on the in­clusion
in cost of any profit on own build­ing
operations.
Cost less depreciation, or depreciated
cost value, means cost as defined above,
less the depreciation or decline in value
sustained to a given date on buildings,
machinery, and equipment, and certain
depreciable elements included in the cost
of land, such as sidewalks for example,
computed on the basis of cost according
to any one of a number of methods in use.
A second kind of value frequently used
in connection with plant property may be
termed reproduction or replacement cost.
Obviously, this does not apply to land,