Proceedings of the Conference on Valuation Held in Philadelphia November 10th to 13th, 1915, Under the Auspices of the Utilities Bureau

This historic book may have numerous typos and missing text. Purchasers can download a free scanned copy of the original book (without typos) from the publisher. Not indexed. Not illustrated. 1916 Excerpt: ...suddenly in some cases--in others their approach may be apprehended. l The straight line method, rather than the sinking fund method, of computing depreciation has been adopted in these franchises tax cases.2 These cases leave no doubt that depreciation allowance out of earnings should make provision for accrued depreciation and for functional depreciation. The question as to what are net earnings is the same in a franchise tax case as in a rate case, because the same credits and debits are made. Therefore, the measure of depreciation allowances out of earnings applied in franchise tax cases is equally applicable in principle in rate cases with reference to the ascertainment of earnings attributable to the return. DEPRECIATION AS A FACTOR IN ACCOUNTING The United States Supreme Court has well stated: Since the regulation of the railroad carrier by the public authority, and especially the fixing of rates to be charged, depend primarily upon two fundamental considerations: (a) the value of the property that is employed in the public service, and (b) the current cost of carrying on that service, it is clear that the maintenance of a proper line of distinction between property accounts and operating accounts is essential to the execution by the Interstate Commerce Commission of the supervisory and regulatory powers conferred upon it by Congress.3 The early failure to recognize the factor of depreciation was accompanied by its neglect in the accounts of utilities. In the regulation of public utilities, uni formity of accounts and the application of correct accounting principles to ascertain the true financial situation of the utility are conspicuous features because they are important to the public, the corporate management, and the investors. ...