Tuesday, August 9, 2022

Depreciation

 Depreciation is a "cost" related to the depletion or wearing out of an asset.

Suppose you delivered pizzas in your Masarati Quattroporto for $20 an hour. Your first attempt at calculating your profitability might suggest that you are making money...figuring gas burned and so on.

But if you fold in the loss of value in the vehicle, you would most likely find yourself deeply in the hole.

Depreciation shows up in surprising places. A farmer who grows sod can depreciate his land because he shaves off about an inch of topsoil every time he harvests and ships out sod.

Corporations use depreciation to offset what appears to be "obscene" profits. Sure, it looks like you are making money hand-over-fist in some extractive industry like mining or oil. But every gram of metal you remove reduces the value of the property just as every barrel of oil or 1000 cubic feet of natural gas removed also reduces the value.

Time horizons

In general, the Internal Revenue System and Generally Accepted Accounting Practices establish depreciation schedules. For example, the useful lifespan of a building might be 20 years so 1/20th of the purchase price can be written off each year. A vehicle might last 5 years so 1/5th can be deducted from the gross profits as a "cost" and thereby reduce income taxes.

Actual depreciation schedules can be much more complicated that "straight line" calculations but the basic concept is the same. Assets get used up over time and "depreciation" is a stab at apportioning that wear-and-tear out as a yearly offset against profits.

Oil

So if the oil industry was using GAAP schedules for their oil-fields and refineries and then, out-of-the-blue are told that those assets will become illegal/obsolete in seven years (2030)....then it suggests that the industry would be justified in claiming depreciation of 14% against every asset on the books for the next seven years: The production fields, the pipelines, the port facilities, the compressors, the refineries, the trucks...everything.

Just saying...the Greens cannot have it both ways. If they really are going to make fossil fuels illegal/obsolete by 2030 then the petroleum industry has a way to shelter some of their profits until then. If the Greens are just stomping their feet and making noise then we can just ignore them.


6 comments:

  1. Your depreciation math is accurate but when has MAFF (be racyesst) have anything to do with the greenies FEEEEELINGS?

    The carbon they want to reduce is You and I as have already been explained by many sources (GA Guidestones, WEF and such reports)

    I'm pretty sure self defense is somewhere in the Bible

    ReplyDelete
  2. I just ignore them. Its simple math. Their sh*t don't work in the real world.

    ReplyDelete
    Replies
    1. While you can ignore them can you ignore the results for you and your family?

      Chimpanzees randomly (or ideologically) pulling levers of real power are hard on the machinery of real life.

      While I cannot do anything personally about the BIG Circle events, I try to understand their effects on the LITTLE Circles (like me and mine) that I DO have some ability to change-prepare for.

      Or as someone smarter than I said, "You might ignore the revolution, but the revolution will not ignore you".

      Delete
  3. Or they could just shut down for a week so the Democrats could see what happens when they get their goals early?

    ReplyDelete
  4. John the powers that BE (aka string pullers) saw the risk (Danger to themselves) of an American Truckers strike going public so it NEVER HAPPENED as far as the vast majority of Joe 6 pack Americans knew.

    The Media is a big part of the problem. Hide it or smother it like a baby in the crib with disinformation is their MO about troublesome information.

    ReplyDelete
  5. As long as the Demonrats are in power the Greenies can have pretty much whatever he want. Because the two groups are seriously comingled.

    ReplyDelete

Readers who are willing to comment make this a better blog. Civil dialog is a valuable thing.