Operating cycle. Table 2 The above is a modified balance sheet of a firm F at the beginning of year N. We suppose that machine M’s annual depreciation is 100 and repeated human capital use is 300. The machine M, raw material, and labour are used completely during year N to produce a new machine, machine P, which will be linearly depreciated over five years. Thus, machine Pis a mixed asset, generated by financial and human resources. Moreover, its value is equal to .3.2.3. Production of mixed assets. During the production process, some ‘pure’ financial, human, and natural resources may e necessary to create new resources, which can be characterised as ‘mixed’ assets. Here is the balance sheet just after the production of machine P: As the financial resources represent two-fifths of machine P’s value and the human resources correspond to three-fifths of its value, machine P’s depreciation expense is apportioned, according to these ratios, to the classical financial depreciation expense and the human depreciation expense. Therefore, if no operations occurred during year N+1, the depreciation expense accounts of year N+ 1 are assessed as follows: 3.3.2.4. Exit operations. We now examine the accounting procedure for the settlement of socio-environmental capital. Suppose that a firm F follows the accounting procedure described in the entry operations and, for example, records this operation in its journal: Step 1: At the beginning of year N, the field provides F with capacities, particularly fertility, CpFe. In the natural capita account, the farm records an amount C in monetary units, because of AA4. From the farm’s perspective, the CpFe is now < resource that it can use. Thus, it reports an asset of the same amount C, called, for instance, ‘capacity of fertility’. Step 2: The farm transforms this CpFe into a usable production capacity for wheat, CpPW, because it wants to use this fielc to only produce this grain. This operation settles the previous asset account and creates a new asset account, called, fo1 instance, ‘production of wheat’, recorded as a repeatedly used asset. We assume that this field will be used for this production until the end of year N (and not after). The value of this account is still C. Step 3: This field’s recurring use for this production implies a consumption of the initial natural capital’s CpFe. As we explained before, we correlate this degradation with CpPW deterioration and thus, have to report systematic depreciation expenses. At the end of year N, all the CpFe embedded in the asset ‘production of wheat’ will be consumed. Step 4: During year N, this CpFe degradation allows the farm to sell its wheat. Step 5: The sales create new CpEx, recorded in the cash account as an amount V. As the sales generate only financial resources, the net value of the repeatedly used natural capital’s account can only decrease, because of the systematic depreciation. Thus, F will never be able to settle the natural capital account; indeed, as we explained in the exit operations, this operation is possible only by settling the corresponding asset account. The TDL model needs to authorise an operation that can increase the use of the RUNC account: we need to implement a de- depreciation, which is unnecessary in the case of financial capital, because the standard creation of values (the revenues) directly replaces the consumed financial resources. This operation is a transformation of a financial resource into a repeatedly used natural resource (or a repeatedly used human resource in the general case) in order to compensate for the systematic depreciation. As such, this transformation in the case of the financial capital is called an investment (conversion of cash into a fixed asset), we can keep this name: de-depreciation is a new kind of investment. In other words, to settle its natural capital account and maintain this capital, F has to invest a part of its financial resources into natural resources. Table 3 sums up the relationship between depreciation and de-depreciation. ee a ¥ eae a a Pa ae ee i a ge t. Ye. lle. ca. . 46. Rae Step 6: The field representatives determine whether or not the capital is preserved. Let us suppose that, in this example they validate the maintenance conducted by the farm. Thus, the natural resources, that is, the natural assets CpFe an production of wheat, are used to refund the natural capital. The net value of the production of wheat account equals 0, because we assume that F totally consumed this resource 3.3.2.7. Evaluation of capital. Farm F uses its exchange capacity for field maintenance, in accordance with what was decidec with the field representatives. Let us call the total financial costs involved in this procedure the total costs of maintenance (CoM). This operation corresponds to a transformation of a financial resource into a natural resource, fertility capacity, foi example. As this resource conversion occurs in order to maintain the natural capital, this operation is a de-depreciation Therefore, the farm credits its cash account with an amount equal to CoM and debits its CpFe asset account with the same amount. Accounting translation of capital degradation and maintenance. Table 3 A. Rambaud, J. Richard/ Critical Perspectives on Accounting xxx (2015) xxx-xxx TDL statements of the example in Appendix D References As we explained in Example 2, the cash will be transformed into natural resources. In order to simplify the recording, the credi of the cash account, at the amount of the maintenance costs actually paid by the farm, will correspond directly to the debit of th accumulated depreciation of the production of wheat account. Thus, these maintenance costs de-depreciate the asset ‘productio: of wheat’. In this example, we assume that instead of spending the 100 units initially planned, F decides, according to the actue state of the field, to pay only 50 units. The recording (2) in the table below corresponds to this operation. In this way, th maintenance costs concretely spent are no longer mere expenses but investment types; through this de-depreciation, capita preservation is an investment. The only expense corresponding to this maintenance is now the depreciation expense, whic! symbolises the degradation of the concerned capital. C6 at et A SE ey Sn ek A: Pe , Eee sa fe
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