Short Answer Question 3 - Accounting for PPE

(Answer length - approximately 100 words)

The management of Tassie Ltd has decided to use the fair value basis for the measurement of its equipment. Some of this equipment is very hard to obtain and has in fact increased in value over the current period. Management is arguing that, as there has been no decline in fair value, no depreciation should be charged on these pieces of equipment.

Required:

Do you think that the management is correct in their assumptions? (4 Marks)