From: ope-admin@ricardo.ecn.wfu.edu
Date: Tue Apr 03 2007 - 19:39:16 EDT
> Suppose a capitalist buys an asset and expects it to last 5 years. Let > the depreciation shown in the accounts be 20% per annum linear, for the > sake of the argument. Due to unanticipated technological progress, the > capitalist is forced to replace the asset with a new and better one > after 4 years. I think that the way that this should be accounted for is > by prior year adjustments. Hi Phil: Are you sure you agree with us? The above is a type of "rule of thumb" that Michael and I have been saying can't reliably be used to accurately anticipate sudden technological changes in means of production. What you are doing is basically proposing a depreciation schedule which takes into account the *expected* rate of moral depreciation. Yet, what is the expected/anticipated rate of moral depreciation other than a guess based on past rates of moral depreciation? The actual extent of moral depreciation is only known ex post. In solidarity, Jerry
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