Distortions Imposed By Inflation on Historical-Cost Depreciation

The use of historical-cost depreciation in periods of persistent inflation decreases the present value of depreciation deductions, thus understating the true economic cost of capital and increasing the real after-tax rate of return required by potential investors. Efforts to correct these problems by adopting depreciation methods that allow for artificially short recovery periods or accelerated rates do not provide an adequate solution. Distortions imposed by inflation on historical-cost depreciation can be adequately corrected by indexing the historical-cost basis.


Issue Date:
1983
Publication Type:
Journal Article
PURL Identifier:
http://purl.umn.edu/159501
Published in:
Journal of the Northeastern Agricultural Economics Council, Volume 12, Number 1
Journal of the Northeastern Agricultural Economics Council
Page range:
91-98
Total Pages:
8




 Record created 2017-04-01, last modified 2017-08-27

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