Publication Date


Document Type


First Advisor

Iliff, Kathryn (Professor of accountancy)||Avery, Clarence G.

Degree Name

M.S. (Master of Science)

Legacy Department

Department of Accountancy




The purpose of this study was to investigate the use of replacement accounting for the treatment of certain property assets by the railroad industry. Replacement accounting has long been considered an unacceptable practice by the accounting profession and, in this study, an attempt was made to point out some of the shortcomings of this technique by analyzing both its application and the support given to it by the Interstate Commerce Commission. The data for this investigation were obtained from the following sources: periodical literature and related studies; the Interstate Commerce Commission; and the financial statements of eight selected railroads. In view of the importance of the investor's market today, replacement accounting does not appear to reflect properly the periodic cost of using an asset because it disregards the functional or useful life of the asset. The acquisition cost is not allocated to future periods, as would be true under a depreciation accounting method. Under the replacement accounting ruling of the Interstate Commerce Commission, the railroad's investment in these particular assets is not properly presented. These assets would not only be given a more accurate treatment in the balance sheet if a depreciation accounting procedure were to be adopted, but a more reasonable measurement of periodic net income would also be provided.


Includes bibliographical references.


67 pages




Northern Illinois University

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