Depreciation accounting in publicly quoted companies in Kenya
Abstract
Depreciable assets comprise a significant portion of
the assets bf many business enterprises. Depreciation can
therefore have a significant effect in determining the
financial position and results of operations of those
enterprises.
This study investigates depreciation practices of
publicly quoted companies in Kenya. The study covers the
level at which estimates are made, depreciation methods
and factors that influence the choice. The study revealed
that: straight line method is more popular with reducing
balance method only being used to certain extent.
Asset life estimate is common among firms with reviews
when need arises. Consultants, mainly valuers are used to
arrive at these estimates and decisions.Depreciation decisions
are observed to differ across firms even in the
case of those with common fixed.assets
It was statistically reaffirmed that there is a positive
relationship between depreciation expense and operating
income. The studied companies do not refer to capital
allowances at all when arriving at the asset lives.
Fixed assets being prone to effects,of wear and tear
and obsolescence.,considerable attention should be placed
on depreciation decisions by way of reviews and revisions.
Citation
Master of Business and Administration, University of Nairobi, 1989Publisher
University of Nairobi. Faculty of Commerce