Asset Impairment and Depreciation before the 15th Century

Abstract

This paper investigates impairment and depreciation accounting in the 13th to 15th century. It finds that the first known instance of impairment accounting was in 1321, while for depreciation, it was 1399 not, as has previously been claimed, 1299. The study demonstrates the difference in approach at that time between the two forms of adjustment and shows that impairment was the original form of adjustment for reduction in asset values, a form that was applied in situations where physical assets had been lost, or deteriorated, or devalued over the reporting period. In contrast, depreciation was algorithmic, linked to a time-based straight-line depreciation charge equivalent to 10 percent per annum. These findings not only relocate recognition of the emergence of depreciation provisions to the end of the 14th century but, also, from France to Spain. However, in both cases, in Italian firms with Italian accountants.

The emergence of double-entry bookkeeping in Tuscan firms of the thirteenth and fourteenth centuries

“…8. Among the most recent studies in the history of accounting that have used documentation from Datini's companies, we mention Kuter et al (2017Kuter et al ( , 2018Kuter et al ( , 2020. 9.…”

earlier synthetic balance sheet of Datini's Company in Avignon (1410)

“…Our 13-year study of the Datini archives in Prato allow to find a lot of things undescribed before. In Datini's archives alone we were able to find the early "Profit on Merchandise" account (1392), Trial Balances and the Statement for sending to the headquarters (1393) (Kuter, 2017), early examples of asset impairment and depreciation (1392-1399) (Kuter, 2018a), the formation and use of a profit reserve (Kuter, 2019a), adjusting entries (Kuter, 2019b), cash accounting (Aleinikov, 2018b), early accounting of insurance transactions (Kuter, 2019c). There is no doubt that further studies of the archives of Datini, both by the authors of this research into primary sources of medieval accounting books.…”

The formation and use of a profit reserve at the end of the fourteenth century

“…(de Roover, 1956: 116) Several studies have been conducted into early financial accounting practice following the emergence of double-entry bookkeeping in the thirteenth century (e.g. de Roover, 1944de Roover, , 1956de Roover, , 1958Klimczak, 2013;Melis, 1962;Zerbi, 1952) and many have written about the content of account books, account entries and account reports, including Castellani (1952), Edler de Roover (1943), Goldthwaite (1968Goldthwaite ( , 1985Goldthwaite ( , 2009Goldthwaite ( , 2015Goldthwaite ( , 2018, Goldthwaite et al (1995), Lane (1944Lane ( , 1977, Lee (1977), Kuter et al (2017Kuter et al ( , 2018, Ryabova (2018) and Usher (1914). However, most who have investigated these topics in the archives of Italy have been economic historians, historians, linguists or philologists, not accounting historians.…”