Concepts of Depreciation and Their Implication in Accounting Theory and Practice.

Abstract The article focuses on the thesis Concepts of Depreciation and Their Implication in Accounting Theory and Practice by Phayom Bhavilai. The purpose of this thesis is to develop an appropriate accounting concept of fixed asset depreciation in compliance with the basic accounting postulates underlying present accounting practice. Investigation has been made into various conceptions of fixed asset depreciation, which have been referred to or implied in the fields of accounting, economics, law, and engineering. Theoretical analysis and comparison of these conceptions are necessary for development of the depreciation concept, which is considered most appropriate for accounting purposes. The study involves a thorough analysis of the "cost" and "value" concepts of depreciation. Evaluation is extended to the "deferred maintenance" concept under which depreciation of fixed assets is measured by the difference between the present value of fixed property and its replacement cost new. The effect of general price level changes is considered as it influences managerial judgment in selecting the depreciation base.