Valuation.  The  principles  of  valuation  that  should  be  ap-
plied to  the  fixed  property  of  a  governmental  agency  differ  to
some  extent  from  those  that  have  been  found  to  be  most
effective  in  establishing  the  book  values  of  similar  properties
of  a  commercial  enterprise.  In  a  commercial  enterprise,  and
especially  in  an  incorporated  one  in  which  the  ownership
changes  from  time  to  time,  it  is  essential  that  the  valuations
of  fixed  assets  be  based  on  present  worth  as  a  going  concern
or  based  on  cost  figures  which,  when  considered  in  conjunc-
tion with  depreciation  reserves,  may  produce  figures  represent-
ing the  present  worth.  This  principle  is  based  on  the  assump-
tion that  the  reserve  for  depreciation  is  set  up  to  take  care
of  usual  and  regular  deterioration  of  property  other  than  that
which  is  overcome  by  current  repairs.  If  a  reserve  for  depre-
ciation is  established  on  a  very  conservative  basis  and  thereby
provides  for  extraordinary  or  unforeseen  deteriorations,  the
figures  resulting  from  the  deduction  of  the  reserve  from  the
cost  values  of  the  property  are  subject  to  some  qualifications.
When  a  reserve  for  depreciation  is  set  up  by  annual  install-


396   GOVERNMENT  ACCOUNTING  AND  REPORTING

ments  the  loss  on  the  investment  in  property  is  estimated
annually,  taken  into  account  currently,  and  charged  to  opera-
tions, thus  making  each  fiscal  period  bear  its  fair  share  of
replacement  cost.
