concern") accrual value current average sale-value in the market current replacement cost cash value economic value insured value scrap value deflated value (allowing for price inflation) By how much then, do fixed assets used in production truly decline in value, within an accounting period? How should they be valued? This can be arguable and very difficult to answer, and in practice, various conventions are adopted by accountants and auditors within the framework of legal rules and economic theory. In addition, the depreciation schedules imposed by tax departments may differ from the actual depreciation of business assets at market rates. Often, governments permit depreciation write-offs higher than true depreciation, to provide an incentive to enterprises for new investment. But this is not always the case; the tax rate might sometimes be lower than the real market-based rate. Furthermore, businesses might engage in creative accounting and deliberately state their assets and liabilities held at a balance date, or interpret the figures in some other way, to increase the amount of depreciation write-offs, and thus boost their income (how this is done will depend a lot on tax law). For all these reasons, economists distinguish between different kinds of depreciation rates, arguing that the "true" consumption of fixed capital is really the economic depreciation, assessed by relating financial data to mathematical models, to arrive at a figure that "seems credible". The economic depreciation rate is based on observations of the average selling prices of assets at different ages. The economic depreciation rate is therefore a market-based depreciation rate, i.e. it is based on what an asset of a given age would currently sell for in the market. In national accounts In national accounts, CFC is a component of value added or Gross Domestic Product, and regarded as a cost of production. It is defined in general terms as the decline, in an accounting period, of the current value of the stock of fixed assets owned and used by a producer as a result of physical deterioration, normal obsolescence or normal accidental damage. The UNSNA manual notes that "The consumption of fixed capital is one of the most important elements in the System... It may account for 10 per cent or more of total GDP." CFC is defined "in a way that is theoretically appropriate and relevant for purposes of economic analysis". Its value may therefore diverge considerably from depreciation actually recorded in business