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Tuesday, March 30, 2010

Eleven Plus Depreciation

Very recently a mum explained that her latest child was the fourth member of the family to come to us for lessons. (There is still one child after this one.) After all the pleasantries and the catch up chats had taken place I was asked a key eleven plus question. No not that one – but a question that holds a significant place in a mother’s heart.

“All my children have used the same eleven plus books. Do we need to buy new ones?”

In book keeping terms there is a method of depreciation called the: “Diminishing Balance Method.” Under this method depreciation is charged at a fixed percentage.

If the family bought eleven plus books for£10.00, then in the first year the books could depreciate at 40%. This would be 40% of £10.00 – leaving a net book value of £6.00.

The depreciation in the second year would be £2.40 which is 40% of £6.00.

There after the book would depreciate to £1.44, £0.86, £0.52, £0.31, £0.18, £0.11 – and at this stage one could reason that the book had served its purpose.

In many previous years we expected house prices to rise. A house worth £300 000 when the £10.00 book was bought may have leapt in value to £450 000 in just a few months. The value of the house may then have dropped back to pre £300 000 levels. Your house may have gained value with five children living in it – but the eleven plus book may have dropped in value through depreciation.

The one defensible attribute in handing an eleven plus book on through armies of children is that the ten pence book may provide the information on the one question that leads to passing the examination. What then is the ten pence book worth?

What advice did I offer?

“The examination has not changed much over the years. Books and materials have not had to change much over the years. Keep using the book – but do buy a new rubber to take out any residual pencil marks.”

We parted on amicable terms.

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