A director of a public listed company has expressed concerns about the accounting treatment of some of the company’s items of property, plant and equipment which have increased in value. His concern is that the statement of financial position does not show the true value of assets which have increased in value and that this ‘undervaluation’ is compounded by having to charge depreciation on these assets, which also reduces reported profit. He argues that this does not make economic sense.
Respond to director’s concerns by summarizing the principal requirements of IAS 16 Property, Plant and Equipment in relation the revaluation of property, plant and equipment, including subsequent treatment.
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