In 1889 a New Zealand company had to write down its paid-up capital by 27 percent, because, the Chairman stated, previous management had failed to allow for depreciation as an expense. An investigation was conducted to see if this capital reduction could have been avoided had the company followed modern depreciation policy. This revealed that the failure to depreciate adequately was not the main cause of the capital reduction, other firms followed the same practice and contemporary English legislation did not permit depreciation as a tax deductible item, while United States courts were rejecting depreciation as a valid expense.

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