The long and short of asset lives
Asset lives and depreciation methods for fixed assets should be structured such that at the end of each asset's life a zero balance is reflected as the book value of the asset. Such accounting requires the periodic review and revision of asset lives. Assets can be assigned longer or shorter lives, based upon certain accepted accounting procedures. In the United Kingdom, most fixed assets have recorded useful lives that are shorter than expected and many fully depreciated fixed assets remain in use. A survey of the depreciation and asset life review policies of 12 large U.K. firms, coupled with a review of asset accounting standards in the U.K., indicates the hidden financial reserves occasioned by such lax accounting. These reserves are not quantifiable. It is possible that stricter accounting standards in these areas are required.
Publication Name: The Accountant's Magazine
Divestments: some practical thoughts on how to sell a division
Large corporations divest themselves of operating divisions or subsidiaries because: the division is in a line of business too diverse from that of the parent, the division's operations are too small to warrant parent company management thereof, or the parent needs the cash available from the sale. However, corporate divestment often adversely affects the reputation of the divesting company. To avoid the negative aspects of divestment, large corporations should: plan for divestment in strictest confidentiality, announce divestments with comprehensive communication efforts, and find appropriate parents for divested divisions. Case studies of the Dubin Clark and Company acquisitions of Crescent Manufacturing from Squibb Corp. and Sonoco Buildings from Sonoco Products Corp. are analyzed from the standpoint of divestiture.
Publication Name: FE: the Magazine for Financial Executives
Some Thoughts on Depreciation
The theory of depreciation represents perhaps the most important problem in accountancy thought. The problem arises from the need to determine the changes to be made for the use of assets to correct expenditure. Changing price levels obviously influence current values. The normal methods of depreciation are: straight-line, declining balance, sum-of-the-digits, and consumption. The conclusion is that depreciation should not be regarded to be the result of conformity with some simple law. In principle, the value of individual asset should be considered annually for accounting purposes in the light of the changes in its operating cost and in extent of utilization. This would be a considerable task that could hardly be contemplated.
Publication Name: The Accountant
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