102 FOREST VALUATION 



results from the specific balance sheet is evident. When the 

 accountant insists on retaining land and timber in the balance 

 sheet at their original cost, the credits will exceed the debits 

 by the amount of annual expenses not entered as a capital ex- 

 penditure. This deficit is further increased by interest paid 

 on borrowed capital if such expense has been incurred. By 

 contrast, the economic statement shows an even greater "cost," 

 since interest is added as a cost item to all capital invested, 

 whether borrowed or not. The assets, on the other hand, are 

 treated without any regard for actual cost, their value being 

 determined entirely on the basis of future income (Chapter VII). 

 The value of forest property, which is used in the economic 

 statement, is its expectation or capital value, until it reaches 

 maturity, when the capital value of the standing timber is 

 merged in the sale value from which it is derived. The com- 

 parison for timber property at any year previous to maturity 

 of the timber will show. 



The economic forecast in forestry thus consists of balancing 

 past costs, with compound interest to date, against future 

 income ( 62) discounted to date, as represented by expectation 

 value of assets. By thus comparing the relative values of past 

 net outlay and future net income, for any year a, the exact 

 economic status is revealed for that date. 



This method of valuation for forest assets may be compared to 

 the appraisal of the 'property and business of a lumber company 

 for purpose of sale. Cost would not finally determine the value 

 placed upon any item of such property. The mill and logging 

 road, machinery and stock, would be valued on the basis of 

 their future usefulness to the purchaser and present owner. 

 The timber would be appraised at going prices for equally 



