Many organisations elect not to measure their property, plant and equipment at fair value, but rather, prefer to use the ‘cost model’. This will provide lower total assets and lower measures, such as net asset backing per share. You are required to answer the following questions:

a. What might motivate directors not to revalue the property, plant and equipment?

b. What are some of the effects the decision not to revalue might have on the firm’s financial statements?

c. Would the decision not to revalue adversely affect the wealth of the shareholders?