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- Pentagon Corrects “Accounting Error.” As Always, the First Casualty of War is the Truth.
Pentagon Corrects “Accounting Error.” As Always, the First Casualty of War is the Truth.
by Clifford F. Thies The American Institute for Economic Research
In June, a spokesperson for the Department of Defense announced that the value of equipment transferred to Ukraine, originally valued at $6 billion, was “corrected” to $3 billion. The prior month, the Pentagon had made a similar correction.
Initially, the equipment was valued at replacement cost. That is, the equipment was valued at the cost of acquiring new equipment sufficient to replace the transferred equipment. As corrected, the equipment was transferred at historical cost less depreciation. That is, at the cost of acquisition at the time of acquisition, less an amount determined by the equipment’s expected useful worklife.
The first valuation, replacement cost, supposes the equipment is well-maintained, and thus has the same expected worklife as when it was new.