Waikato DHB 2

The item in the Times, September 29, concerning the Waikato DHB budget for 2017/18 stated that ‘‘the fact it recently had its land and buildings revalued’’ caused ‘‘a $10m spike in its annual depreciation costs’’. I am puzzled about the legality of the Health Ministry requiring this extra depreciation to be part of the DHB budget, in this year or any other year.

I have always understood that the reason that the value of depreciation for capital assets being incorporated in annual financial statements was to spread the capital costs over a number of future years. At the end of the expected life of the assets the capital value in the balance sheet would be close to zero, and the cash balance would indicate whether or not the decision to invest in the venture was a good one or not.

In the case of the DHB assets it seems that they are being required to depreciate on a higher value not related to actual cash invested. Therefore the value of the assets have appreciated. So who gets the benefit of the value of the increase? Presumably the DHB has maintained the assets in good condition, with the result that it is now being penalised for causing the assets to appreciate in value. Does this not indicate that the DHB has incorrectly been robbed of the amounts of depreciation, that have formed part of its operating expenses? Should not those over charged depreciation costs now be refunded to the Waikato DHB? (Abridged)

Ron Pengelly Hamilton