How Costs are Applied to the Bottom Line

Different assets might have different impacts on the system’s financial bottom line because they might not follow the same accounting rules. Some assets depreciate, while others appreciate or maintain their value. As discussed previously in this section, gray assets are more likely to depreciate upon installation, while green assets are more likely to appreciate or maintain value over time. These two investments have different impacts on the system’s finances. The timeline for cost recovery is not the same if an asset is purchased through capital versus operational funds. The purchase budget might also impact the rates charged by the system if it charges rates. Systems should be aware of these variances when planning projects and budgets.