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Another no-so crowded day at Hong Kong Disneyland. Photo: SCMPOST

Disneyland deficit doubles to more than HK$345 million

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SCMP, February 21

And of all the lame excuses, they blamed depreciation.

For their benefit, and also for the benefit of certain people who cannot distinguish a profit and loss account from a balance sheet, let me explain a very simple concept of accounting.

If you buy a piece of equipment for your company and you expect it to last 10 years before it is worn out and needs replacement, you do not deduct its entire cost from the company’s income in the year you bought it but spread that cost over the 10 years of the equipment’s expected lifetime.

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This has the effect of setting costs against related revenues and, by thus smoothing out the profitability of the company, presenting what auditors call “a true and fair view” of the company’s affairs.

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