Shivaji Statue Project & Asset Depreciation
Why the Shivaji statue project by Government of India makes sense if looked through the Asset Depreciation lens.
The Government of India has launched a project to build statue of Sivaji in the Arabian Sea near Maharashtra. A lot of rational arguments have been made for and against it. I would like to present another perspective to the debate. Oflate I have been reading a lot about a particular financial term called depreciation. My product (Whenda) necessitated me and my team to understand about depreciation, how it’s used and we also worked out some math on pen and paper to calculate and see how it impacts balance sheet of a company.
Depreciation 101:
Typically a company (in this case, a nation) buys a lot of stuff. Some of it is used within a year of its purchase. While others last more than a few years. For the things that last more than a few years, government tax laws allow companies to spread the purchase amount over those many years instead of putting it as expense in a single year. So if you purchased a laptop for $1000 for your company and a laptop’s life is 3 years, you can quote $333.34 ($1000 divided by 3 years) as expense for the next three years. There with me till now?
Now let’s add another dimension to this. The brand new laptop that you have purchased today wont be of the same value 1 year later. Agree? In simple terms, since your laptop has a life of 3 years it should fall in value by 33.34% each year (i.e., 100% divided by 3 years). This fall in value of the laptop (or any other asset) is called Depreciation.
Not all assets depreciate over time. Some assets like land and buildings (with regular upkeep) appreciate over time. If you are still there with me, you know what I am hinting at. Be it Eiffel, Tower of Pisa, Statue of Liberty or our own Taj Mahal. These landmarks have become iconic assets for the city/state/region/country they stand in and have created so much (monetary )value beyond the amount spent in. I would call these as appreciating assets.
Many of us (in India) know about Shivaji as we have studied about the legacy of Shivaji in our schools. Every kid knows about the Guerrilla warfare because of Shivaji. A beautiful memorial narrating the tale of this Warrior King is not only a great educational aid for our kids but also a monetarily appreciating asset for the country. It comes with a cost (required to build such a monument). This cost only goes up with every passing day. Wish we had already built it a couple of decades ago when prices were still low. But better build it now than later (or never).
