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The depletion base includes both intangible development costs and restoration costs.

A. True
B. False

User Jhobbie
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1 Answer

4 votes

Final answer:

The statement is true; the depletion base does include intangible development costs and restoration costs, which ensure proper accounting for the expenses involved in natural resource management and restoration to meet regulatory or policy requirements.

Step-by-step explanation:

The statement that depletion base includes both intangible development costs and restoration costs is True. In the context of accounting for natural resources, the depletion base is the total amount of cost that will be allocated over the resource's useful life. It typically includes the capital costs to acquire the resource, as well as costs for exploration, development, and restoration that are incurred to bring the resource to a salable condition. Specifically, restoration costs are included to ensure the company accounts for the expense of returning the land or operation site to its original state or another predetermined state as required by regulatory bodies or company policies.

Economic principles suggest that restoration efforts have an optimal point — defined in this case as 300 acres — where the marginal costs are lower than the marginal benefits. However, once restoration exceeds this optimal point, the additional costs to restore more land would outweigh the benefits derived from that land. The consideration of such costs and the strategic integration of conservation-related expenses are crucial in conservation science, leading to better outcomes in terms of biodiversity conservation.

User ThrowsError
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