CO129-573-14 Kowloon-Canton railway- provision of a renewals fund 7-6-1938 - 11-10-1938 — Page 15

ALL COMMUNICATIONS

TO BE ADDRESSED TO THE

CROWN AGENTS FOR THE COLONIES.

THE FOLLOWING REFERENCE AND THE

DATE OF THIS LETTER BEING QUOTED.

Z/E.261/14.

TELEGRAMS: "CROWN. LONDON'.

TELEPHONE:

ABBEY 7730,

ENCLOSURES.

CROWN

AGENTS

FOR

THE

COLONIES

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14

4, MILLBANK,

LONDON, S.W.1.

25th August, 1938.

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Sir,

C.O. REGI

I have the honour to acknowledge the receipt of your letter No.53932/38 of the 12th August, transmitting copy of a

Despatch dated 7th June from the Governor of Hong Kong regarding

the question of the provision of a Renewals Fund for the Kowloon-

Canton Railway, together with a note prepared in the Colonial

Office on the matter.

We agree that it is desirable that a Renewals Fund

In the absence of such a Fund a

should be established.

considerable sum may be needed for railway replacements at a

time when it may be inconvenient to provide it. Further, it

should not be overlooked that in the case of a railway the

expenses incurred in any one year on permanent way, bridge and

rolling stock renewals, rarely represent the reduction in value

due to wear and tear-of the railway equipment in that year and

the nett receipts are not, in consequence, a correct basis for

judging if the railway has been profitable or not. In order

that the annual Balance Sheet may show correctly the results of

the year's operations, it is necessary to include in it on the

debit side a sum to cover the average annual cost of renewing

wasting assets.

3.

In order to determine the amount which should be

credited to the Renewals Fund annually it is necessary to

ascertain the original cost of all wasting assets and to

estimate their anticipated life. The original cost-less

salvage value when an asset is replaced-divided by the

/anticipated

The Under Secretary of State,

COLONIAL OFFICE.

CA

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