Valuation of long-term tangible asset under LRIC methodology

This paper presents valuation of long-term tangible asset under Long Run Incremental Cost methodology. We investigated current practice and trends in different approaches for depreciation in telecommunication industry under accounting rules and economic ones. Precisely, we analysed economic depreciation as a necessity in looking forward cost models. Our paper show that, in such models, depreciation usually accounts for a large proportion of total costs, and hence the appropriate method for estimating depreciation has been in the focus of attention by regulators and industry operators. Furthermore, our paper explains the difference between accounting depreciation and economic deprecation and why it is more useful usage of economic depreciation for looking forward cost models in telecommunication industry. Nevertheless, some alignment between accounting depreciation and economic depreciation, exist under specific conditions, but we have highlighted the importance of economic depreciation for regulatory purposes.