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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,
Object Description
Title |
Values sound and otherwise |
Author |
Anonymous |
Subject |
Valuation |
Citation |
Haskins & Sells Bulletin, Vol. 09, no. 09 (1926 September), p. 66-68 |
Date-Issued | 1926 |
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 9-p66 |