Accounting & Tax

A Better Appreciation for Depreciation

Midcap biosciences company will now record depreciation for all assets that are available for use, not just those in productive service.
Stephen TaubApril 25, 2007

Martek Biosciences will restate its financials for fiscal 2006 and the first quarter of fiscal 2007 to revise the way it depreciates assets held for future use.

The $736 million market cap company, which makes nutritional oils for baby food and supplements, explained that it will now record depreciation for all assets available for use. Previously, assets were depreciated only when they were in productive service.

Martek estimated that it will need to take an additional depreciation charge of between $4 million and $4.5 million for fiscal 2006 and between $1.6 million and $1.8 million for the first quarter of 2007. The charges will be reflected as additional cost of sales.

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After tax, the charges will lower earnings for fiscal 2006 by between $2.6 million and $2.8 million and for the first quarter by between $1 million and $1.2 million.

“Our historical accounting treatment for depreciation of assets held for future use reflected our interpretation at the time of the relevant accounting principles,” asserted chief executive officer Steve Dubin, in a statement.