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Utilizing expectations to measure economic depreciation and capital gains of farm machinery

Author

Listed:
  • Cole R. Gustafson

    (Agricultural Economics, North Dakota State University)

  • Peter J. Barry

    (Agricultural Economics, University of Illinois)

  • Steven T. Sonka

    (Agricultural Economics, University of Illinois)

Abstract

Rather than relying on ex post market data, this study derives theoretically more appropriate measures of economic depreciation and capital gains based on the expectations of farmers. In this context, values of depreciable assets are highly sensitive to the pattern of expected future earnings and unexpected windfall gains. Experimental survey data obtained from a panel of Illinois cash grain farmers demonstrate the magnitude by which conventional accounting methods overstate economic depreciation and underestimate real capital gains. These biases make it difficult to appraise the financial well-being of the agricultural sector.

Suggested Citation

  • Cole R. Gustafson & Peter J. Barry & Steven T. Sonka, 1990. "Utilizing expectations to measure economic depreciation and capital gains of farm machinery," Agribusiness, John Wiley & Sons, Ltd., vol. 6(5), pages 489-503.
    • Handle: RePEc:wly:agribz:v:6:y:1990:i:5:p:489-503
    DOI: 10.1002/1520-6297(199009)6:5<489::AID-AGR2720060507>3.0.CO;2-T
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    References listed on IDEAS

    as
    1. Dale W. Jorgenson, 1974. "The Economic Theory of Replacement and Depreciation," Palgrave Macmillan Books, in: Willy Sellekaerts (ed.), Econometrics and Economic Theory, chapter 10, pages 189-221, Palgrave Macmillan.
    2. Gustafson, Cole R. & Barry, Peter J. & Sonka, Steven T., 1988. "Machinery Investment Decisions: A Simulated Analysis For Cash Grain Farms," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 13(2), pages 1-10, December.
    3. Roger C. McNeill, 1979. "Depreciation of Farm Tractors in British Columbia," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 27(1), pages 53-58, February.
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    Cited by:

    1. Grzelak, Aleksander, 2022. "Agricultural Holdings Recording Losses – Characteristics And Determinants," Roczniki (Annals), Polish Association of Agricultural Economists and Agribusiness - Stowarzyszenie Ekonomistow Rolnictwa e Agrobiznesu (SERiA), vol. 2022(4).

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