Depreciation and Other Reserve Funds for Municipal Corporations – Other Voices in an Early Twentieth Century Accounting Debate

Abstract

The use of depreciation by municipalities has been discussed in the accounting history literature previously. Coombs and Edwards (1992) indicated that the issue of the accounting for fixed assets by British municipalities was “substantially resolved” by 1914. While Potts (1982) indicated the issue in the USA was resolved in 1935 by the National Committee on Municipal Accounting. Both of these key papers focused on the debates as recorded in various professional publications and/or academic publications at the time.

This paper provides an historical case study focusing on one municipality, and its accounting for depreciation and reserve funds for a subset of its assets. As a case study, the paper includes the perspective of many of the participants, including judges, politicians, auditors, local government officials, central government officials and the significantly underheard voices of ratepayers and consumers.

Following a 1915 court case and concerns expressed by their auditor, the WCC sought legislation to permit it to operate a depreciation fund and create other funds. The appropriateness of such funds was debated, with the government and the Parliament receiving advice both in favour and against the creation of such funds. It is these voices, mainly from outside the accounting profession, that this paper discusses. Of particular note are the various views of capital maintenance and principles of financial management for local government.