[OPE-L:3123] Re: Straight & Moral

Iwao Kitamura (ikita@st.rim.or.jp)
Wed, 25 Sep 1996 08:41:09 -0700 (PDT)

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John [3024]F

>I am making no grand theoritical claims here. But I do
>think the manner in which capitalists used various
>methods of depreciation as well as the way in which
>the various techniques arose in "The History of
>Accounting Thought" might be of interest.

I could spend several hours to find any reference about accounting depreciation
in the previous century at the library. I found several books written in Japanese
that describe debates around accounting methodologies in Germany.
I'm not an expert nor a researcher in this area, but the historical debate
in accounting methodology for depreciation can be a reference. So I pick up
some components from those books.

Katsuzo Baba(#1) writes that accounting theory in Germany developed since the
"Aktiennovelle" (1870) regulated valuation of property. This regulation (=the
31th article) was too abstract that capitalist properties are to be valued at their
"gemeiner Wert" (=general value). In practice, it meant that properties are valued
at thier purchaced price or production costs. Fixed assets were to be valued at
cost - depreciation as exceptional.

It is interesting that accounting was regulated at first for stock companies at
least in Germany. What was the cases in anglo-world? The dutch East India
company had its accounting method as the first stock company, I think.
The necessity of accounting would be derived from collective investment where
individual capitalists have different relations to a project (company). If one
individual capitalist hold a company, there would be no necessity of balance
sheet and valuation of profit. A fund flow sheet is enough for her/him.

Baba points:
1870 law had its standpoint at interest of creditors. The standpoint of creditors
and the one of industrial capitalist show a certain difference in counting fixed

Jiro Asaha writes that the problem of the1870 law raised debate of counting
fixed assets when industrialization developed. Railroad engineer Hermann Scheffler
criticized the standpoint of 1870 in law his "Ueber Bilanz". His points were:
1. A balance sheet is constructed with real items and ideal items. Real items express
ordinary counting thought and relate to profit-loss counting. In contrast, ideal
items relate to managerial financial aim and also to external aim like devidend policy.
2. ideal items on debt are regulated by ideal items on asset.

Baba writes about the situation of accounting debate after Scheffler's critique.
Simon distinguished objects to be sold and objects to be utilized from assets and
wanted to apply different valuation methodology for them. Thus Simon insisted
subjective principle of balance sheets. In his depreciation theory, consumption
(Abnutzung) is devided into substancial decrease (Substanzveringerung) and
utility decrease (Brauchbarkeitveringerung).

Baba continues:
Rudolf Fischer criticized Simon for his incompleteness and Simon's attempt
to apply valuation in economics to accounting. He constructed his theory
of accounting on the basis of circulation of corporate capital. He placed
depreciation as a matter of management policy. For him, depreciation
expresses loss of property (Vermoegensverlust), but it is only assumed
(fingierte) or anticipated (antizipierte) loss.

BTW, I'm interested in the case in anglo- world.