Analytical Generalization of the Depreciation Multiplier as a Factor of Extended Reproduction of Fixed Assets Depending on the Age Structure

The subject of the study is the expansion multiplier as a quantitative characteristic of the depreciation expansive effect in models of the extended reproduction of fixed assets. The aim of the study is to identify the impact of the age structure of fixed assets on the expansion multiplier value factoring in various methods of calculating depreciation. The research methods include mathematical and computer modelling, as well as deductive logic as a process of reasoning from more general to more specific. The high depreciation of fixed assets of Russian enterprises and the high demand for  depreciation as a source of funds for their renewal and extended reproduction ensure the relevance of the study. The results of the study include the models of extended reproduction of fixed assets due to the expansive depreciation effect using  various  methods  of  accruing  depreciation;  demonstrate  the  relationship  between  the  age  structure of fixed assets and the expansion multiplier. Generalizing the methods of depreciation in terms of their impact on the expansion multiplier values provides the scientific novelty of the research. This paper introduces the expansion multiplier calculation formulas for general and special accelerated depreciation and limits of multiplicative potential of accelerated depreciation. The conclusions of the research work illustrate the possibility of using the expansion multiplier to plan and optimize the depreciation policies of organizations, as well as to evaluate the multiplier of fixed assets in various economies. The authors identified the problems of applying the expansive depreciation effect as a means of extended reproduction of fixed assets in practice, as a result of the limitations of its theoretical models. In overcoming the identified limitations, areas of technical theoretical research are proposed.

1. Napier CJ. Accounting history and accounting progress. Accounting history. 2001;6(2):7–31. DOI: 10.1177/103237320100600202

2. Koowattanatianchai N., Charles M.B., Eddie I. Accelerated depreciation: Establishing a historical and contextual perspective. In: Asia-Pacific economic and business history conf. (Tokyo, 18–20 Feb., 2009). Wollongong: EHSANZ; 2009. URL: https://pdfs.semanticscholar.org/8969/0e7992f7b958489d80bcaeb9540ce842eece.pdf

3. Kunitsyna S. Yu. Depreciation charges as a tool for liberation of the firm’s capital. Izvestiya Baikal’skogo gosudarstvennogo universiteta = Bulletin of Baikal State University. 2005;(1):30–37. (In Russ.).

4. Marx K. Capital: A critique of political economy. Vol. 2. In: Marx K., Engels F. Works (2nd ed.). Vol. 24. Moscow: Politizdat; 1961. 657 p. (In Russ.).

5. Ignatov A.V. Reinvesting depreciation: New horizons for an old issue. Aktual’nye problemy gumanitarnykh i estestvennykh nauk. 2010;(9):96–110. (In Russ.).

6. Lohmann M. Abschreibungen, was sie sind und was sie nicht sind. Der Wirtschaftsprüfer. 1949;2(12):353–357.

7. Ruchti H. Die Abschreibungen. Ihre grundsätzliche Bedeutung als Aufwandsfaktor, Ertragsfaktor, Finanzierungsfaktor. Stuttgart: C.E. Poeschel; 1953. 242 p.

8. Grozdov N. Depreciation and reproduction of fixed assets. Vestnik statistiki. 1950;(2):32–42. (In Russ.).

9. Feldman M.N. Depreciation as a source of expanded reproduction of fixed assets. Finansy SSSR. 1970;(7):36–43. (In Russ.).

10. Horvat B. The depreciation multiplier and a generalized theory of fixed capital costs. The Manchester School. 1958;26(2):136–159. DOI: 10.1111/j.1467–9957.1958.tb00929.x

11. Horvat B. Real fixed capital costs under steady growth. European Economic Review. 1973;4(1):85–103. DOI: 10.1016/0014–2921(73)90032–9

12. Horvat B. Fixed capital cost, depreciation multiplier and the rate of interest. European Economic Review. 1973;4(2):163–179. DOI: 10.1016/0014–2921(73)90003–2

13. Stipetić V. Branko Horvat and economic science: Contribution to research his life and works. Zbornik radova Ekonomskog fakulteta u Rijeci: časopis za ekonomsku teoriju i praksu. 2003;21(2):7–28.

14. Berg M., De Waegenaere A.M.B., Wielhouwer J.L. Optimal tax reduction by depreciation: A stochastic model. Tilburg University, Center for Economic Research. Discussion Paper. 1996;(102). URL: https://www.academia.edu/18427232/Optimal_Tax_Reduction_by_Depreciation_A_Stochastic_Model

15. Gazzola P., Beretta V., Mella P. The Lohmann-Ruchti effect in the development of corporate capital. In: Jajuga K., Locarek-Junge H., Orłowski L.T., Staehr K., eds. Contemporary trends and challenges in finance. Cham: Springer International Publ.; 2019:81–90. DOI: 10.1007/978–3–030–15581–0

16. Lemarchand Y., Nikitin M. Comptabilité, contrôle et sociétés. Paris: Vuibert; 2012.

17. Brief R., Anton H. An index of growth due to depreciation. Contemporary Accounting Research. 1987;3(2):394– 407. DOI: 10.1111/j.1911–3846.1987.tb00646.x

18. Antonov L.A. Ensuring the comparability of linear and accelerated methods of depreciation of fixed assets. Upravlenie ekonomicheskimi sistemami: elektronnyi nauchnyi zhurnal = Management of Economic Systems: Scientifi Electronic Journal. 2017;(6):1–12. URL: https://cyberleninka.ru/article/n/obespechenie-sopostavimostilineynogo-i-uskorennyh-sposobov-nachisleniya-amortizatsii-osnovnyh-sredstv (In Russ.).

19. Antonov L.A. Limitations of depreciation as a source of capital investment and factor of expanded reproduction. Upravlenie ekonomicheskimi sistemami: elektronnyi nauchnyi zhurnal = Management of Economic Systems: Scientifi Electronic Journal. 2018;(8):1–14. (In Russ.).