stock appreciation
Stock Appreciation
stock appreciation
the increase in the market value of STOCK held during a specific time period, generally because of INFLATION. Accountants value stock at the lower of either cost or net realizable value in the BALANCE SHEET, not at replacement cost, and when stock is sold, tax is paid on the profits arising. This gives rise to ‘phantom profits’ and is one reason why British firms were given stock relief in taxation calculations during the inflationary period of the 1970s. Where prices are falling, stock depreciation results. See also HISTORIC COST, INFLATION ACCOUNTING, STOCK VALUATION.stock appreciation
the increase in the market value of STOCK held during a specific time period, generally because of INFLATION. In a firm the accountant will value stock at the lower of either cost or net realizable value in the BALANCE SHEET, not at replacement cost, and when stock is sold, tax is paid on the profits arising. This gives rise to ‘phantom profits’, which, when taxed, can result in over-taxing the firm's real profits.Where prices are falling, stock depreciation results.
NATIONAL INCOME ACCOUNTS also have to take the problem of stock appreciation into account. The government statisticians have the difficult task of excluding such monetary appreciation from the final calculation so as to include only real stock increases. See also HISTORIC COST, INFLATION ACCOUNTING, STOCK VALUATION.