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Professional Libraries

8.202. A number of requests have been received, mainly from professional bodies, persons and partnerships, for a more realistic deduction for expenditure incurred in respect of the purchase of textbooks and other publications of a professional nature. While a deduction is normally allowable in respect of a subscription to a journal or to a professional body which sometimes carries with it the right to receive periodical publications, other publications, purchased frequently at considerable cost, are deemed to be assets subject to depreciation at the rate of 5 per cent on a fixed instalment basis or 7½ per cent on the reducing balance method. The submissions on this subject complain that these rates are far too low.

8.203. Textbooks and digests are the necessary ‘tools of trade’ of the professional person. New editions are constantly being published as advances in professional knowledge and methods make existing texts redundant. In the legal profession continual changes in the law brought about by the enactment of statutes and decisions of the Courts have a similar effect. The effective useful life of library texts is therefore limited. In order to cope with these continual changes, modern technical publishing, particularly in the field of law, now often takes the form of loose-leaf services. These are regularly updated by revision sheets which supersede existing parts of the service as they become redundant. The Committee understands that the cost of updating sheets is treated by the Commissioner, in the same way as professional journals, as a revenue expense. This treatment seems reasonable. An ancillary feature of the present provisions for professional library depreciation is the administrative problems of recording depreciation and accounting for disposals and their related balancing adjustments.

8.204. Two methods of simplifying the recoupment of capital expenditure on professional libraries warrant consideration. Texts costing less than, say, $40 could be treated as a revenue expense to be written off in the year of purchase, and the rates of depreciation on other texts might be reviewed in the light of the present limited useful life of publications. Alternatively, the rate of depreciation could be set at a realistic


  ― 115 ―
level, say 20 per cent per annum, calculated on the reducing balance method for the whole library; additions would be added to the written down value of the library at cost while the sale proceeds, if any, of disposals would be deducted from the written-down balance. Where the sales proceeds in any year exceed the written-down balance plus additions in the year, a balancing charge would need to be made. Otherwise balancing allowances or charges would automatically be added to or deducted from the written-down balance. This effective absorption of balancing adjustments removes the need to maintain continued records of the cost of individual texts. The Committee prefers the second method since it simplifies the clerical task of keeping depreciation records and prevents any abuse of an arbitrary limit for any one text.

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