The Hawaiian gazette., 1916-11-17

nbndnnE OF thc uepreclhtiOn Tunu6 ana
other safety funds, his allegations CON
eerning their relation to stock divi
dends and his comments on operating
expense charges follow; ,'
"If depreciation is not included
among the costs Of operation, then IL Is
misnomer, No profit can be properly
said 10 have been earned until full
provision has been made both for &C.
crued renewals and for depreciation
due 10 obsolescrnce and other causes,
and, IL such provision is not made, II
shonld be clearly understood that even
tually, except for possible appreciation
" property due to entirely extraneous
Gausns mart of the capital will be lost
or will have been distributed in divi-
dcnds. y.hH -
Provides For Depreciation
1.-THE depreciation account is in
tended to provide for current dcprecia.
ton on fixed assets, and there should
be monthly charges TO operating ex-
penscs, with credit to the correspond
lng reserve account which will repre-.
sent az all times the expired yalus OF
the fixed assets in service.
"Up TO June 90 1915, the amount
to the credit Of the compnny's steam
crs' depreciation fund was $37,089.96.
Ry closing ont this fund December 81
1918. with n balance Of $432 ,020.T0 and
corresponding reduction in the float
ing propcrty account, the capital assets
of the company suffered a loss in that
amount.
"If the same financial policy be
.ontiuued il is only question or
time when the total amount of the
,optinr property account, of the com
many will become wiped out with no
revision, out Of profits previously
armed. for a reserve for accrued de
probation.
=, "There is also danger Of paying out
y surplus, on account of dividends,
hat portion of the capital which
,horld rfghtfully be set aside for such
tcerued renewals and depreciation.
Where the assets have deprecated in
;aiue and the depreciation is not pro
yided for out of earnings, the caplta'
is impaired aud IL is not permissioie
10 nay dividends unless the capital is
qnimpaired. ~
Paying For Dividends
at is true that the balance. in the
insurance fund on March /, 1916, was
1905. 272.50 and the surplus account
balance was $201, 503.52. The practise:
however, of appropriating sums out or
she insurance fund for objects other
chan insuranee-notably the payment
If stock dividends-should be discon'
tinued. On this same theory, TINS
fund might also be further utilized
o tnke care of renewals and deprecla'
ton.
of the insurance fund grows too
arge. the company should reduce the
amounts set aside to this account. This
eduction will result in reducing the
,scrrting cost of the steamers.
"The principal point to be consid-
cred in providing for depreciation is
whether or not there has been charged
to income a sufficient sum TO cover the
loss by wear and tear and obsolescenee
and a corresponding amount left in tho
business in the form of cash or an un-
divided asset This has not been done by
the Inter Island Steam Navigation
Company, Ltd.
"The practise Of the company IN
setting aside out of surplus certain
funds such as steamers depreciation
fund, Insurance fund, construction and
repairs fund and repairs fund is sound
business policy but the amounts so set
aside should be applied to the purposes
originall V intended. If, however,
large part of or the whole account IN
the reserves OF safety funds are util-
lied for the payment OF stock diVl'
lends. as has been the case, then the
continual building up of such reserves
defeats its own purpose.
Operations Over Burdensd
"There can be only one construction
to place on such financing and that Is
that operating expenses have been bur
dened with excessive costs.
Field goes on to say that the books
and accounts Of the company are well
tept and that the only criticism to be
made regarding the accounting meth
DDS il in connection with the distribu
ton of operating expenses Of the
steamers.
Field points out that in this connect
| CON for III" three and half years end
ng June 30, 1915, the sundries account
| containing sundry expenses in the oper-
ltion of steamers totalfed $6S3,03S.l !
md recommended that this account be
ifpt in more detail
| Verbal Fireworks
The discussion on these pages of the
| eeTnrt Yesterday and the rest of the
document was midst much verbal ryro'
| 'cchnics. At first it conferred on the
| light and the relevancy of Field in del,
! wing into the non utility side Of the
.ompany's busipess. Attorney Warren
md Chairman Forbes argued the matter
| until an opinion from James l.. Coke
| commission attorney. settled the debate
IN the ground that the utility and non
| Utility accounts were so interviewer and
| because the "wholc" company was
lnder investigation, Field was right.
Field then rccOunted his opinion OF
| hr relation of the depreciation fund tC
he last stock dividend. On December
| II, 1918. he snid. the depreciation &C
cunt of $43a.O2O.70 was closed out and
| brown into surplus. 1t then became q
art Of the non.utlitv side of the bust
| Tess On March |, 1915, two months
alter, 1929 1922 was taken out of sur
'lus and applied to the stock dividend
If $3.50 600.
"This statement is absolutely
Vrong,' Warren intrrposcd, "and il
made up of figures that will be strick
m out whom we get down to facts. Let
| intr H., ,nlitpr RI tbiu o., /.