Question 2 Word Limit: 200 words.

Many organisations measure their property, plant and equipment at cost, less accumulated depreciation and accumulated impairment losses (while other organisations might measure their property, plant and equipment at fair value). You are required to discuss some of the problems associated with basing depreciation expense on historical cost (rather than some other value, such as replacement cost). You are also required to explain why managers might prefer to measure property, plant and equipment using the cost model rather than measuring the assets on the basis of fair value.