The board of directors of Special Services is reviewing its 2020 annual report. A new board member-a nurse with little business experience-questions the accountant about the depreciation amounts. The nurse wonders why depreciation expense has decreased from \(\$ 200,000\) in 2018 to \(\$ 184,000\) in 2019 to \(\$ 172,000\) in 2020 . She states that she could understand the decreasing annual amounts if the company had been disposing of buildings each year, but that has not occurred. Further, she notes that growth in the city is increasing the values of company buildings and wonders why the company is recording depreciation when the property values are increasing.

{Requirement}

Explain to the new board member how recording depreciation is relevant to preparing financial statements.