Question 3 c

A director of Baze, a public listed company, has expressed concerns about the accounting treatment of some of the companys items of property, plant and equipment which have increased in value. His main concern in 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.

Required

Respond to the directors concerns by summarizing the principal requirements of IAS16 property, Plant and Equipment in relation to the revaluation of property, plant and Equipment, including its subsequent treatment.