CHAPTER VII 

 THE VALUATION OF FORESTS 



110. Valuation Accounts in Forestry. Just as the proprie- 

 tary and cost accounts in forestry (Chapter VI) deal with the 

 personal investments of the owner and past elements of cost 

 and income, so the valuation accounts in forestry deal entirely 

 with material assets ( 54) and determine their value. The 

 basis of this determination is the forest inventory ( 55) which 

 shows the area of land of different qualities, the amount and 

 kind of timber and of other resources, and any other property 

 included in the forest. 



111. Income as the Basis of Value of Forests. This phys- 

 ical property must be valued or appraised ( 18, 60). Follow- 

 ing the conservative systems of accountants, the values entered 

 for land, timber, buildings or other forms of property cannot 

 exceed what was actually paid for them (56). Such an asser- 

 tion does not mean that the actual value of the property remains 

 at cost, but that growth in value is not considered equivalent 

 to realized income. An increase in value of assets may and 

 does occur, and, with growing timber, is the rule; but the ac- 

 countant in all such cases desires to await the actual sale of the 

 product, and credits this increase in value only when received 

 in the form of money returns. 



While this custom protects the proprietor or stockholder, no 

 pretense is made that the book values, based on cost, represent 

 the actual value of the property. In Chapter IV the basis of 

 value is seen to be future income ( 61 and 62) and the true 

 value of all assets is derived from this income, discounted to 

 the present, minus future costs. 



In order to grasp the principles employed in appraising for- 

 est values, the relations between physical assets, income and 

 value must again be emphasized. First, the forest land, with 



85 



