CORPORATIONS - SIGNIFICANCE OF APPRECIATION AND CHANGING PRICE LEVELS IN CORPORATE DIVIDEND POLICIES

Authors

Kenneth K. Luce, University of Michigan Law SchoolFollow

Abstract

The appreciation of assets and the legal and accounting problems involved are largely a product of constant fluctuation in the value of money, and to a lesser degree a prodμct of actual rise in the relative value of isolated pieces of property. In the face of political events such as the devaluation of the dollar, and economic phenomena such as the rising price level which the country has experienced since 1933, such problems are of immediate concern to the accountant and lawyer. We must recognize at the outset that appreciation or depreciation in the price level sense are unrelated to depreciation in the sense in which the accountant uses the latter term. Depreciation in accounting is an amortization of the asset over its estimated life expectancy, and is figured usually upon an original-cost basis. Its effect upon surplus available for dividends is mechanical, and results from the periodic arbitrary charge to depreciation expense. The problem here is much different. It concerns the effect upon surplus available for dividends of a rise in the monetary value of the corporate assets, which is due usually to a fluctuating price level. The writer will deal with fixed and current assets in order.

Recommended Citation

Kenneth K. Luce, CORPORATIONS - SIGNIFICANCE OF APPRECIATION AND CHANGING PRICE LEVELS IN CORPORATE DIVIDEND POLICIES, 35 Mich. L. Rev. 286 (1936).
Available at: https://repository.law.umich.edu/mlr/vol35/iss2/6