TAXATION RULES

Greymouth Evening Star, 13 June 1940, Page 4

TAXATION RULES

PROBLEM OF DEPRECIATION. “There is now a danger of sound accounting principles being sacrificed for* expediency inasmuch as executives are inclined to be guided by what the In--1 come Tax Department will allow by way of deductible expenditure rather than by -what should be done in the real interests of the concern,” states an editorial article in the current issue of the New Zealand “Accountants’ Journal.” “Because of the rules of the de-

partment there is an increasing tendency to adopt the reducing balance method of depreciation. This is a pernicious system and is altogether wrong from an accountancy standpoint, because under it less and less is written off as a machine depreciates and becomes more obsolete. Of course, it may be argued that a greater amount should be allowed in the. early life of a machine becatise repairs and maintenance charges will be heavier later on, but this factor does not always prevail. “How often nowadays in the directors’ report to shareholders do we read this phrase, ‘depreciation on buildings, plant and machinery have’ been written off at the rates allowed by the Tax Department?’ We 1 venture to say that in Aiost cases these allow- 1 ances. are altogether inadequate and that by sheltering under such a provision the management is not properly safeguarding the capital and is only heaping up trouble for the company in the future.” 1