The Board of Directors of Gold Structures Inc. is receiving the 2016 annual Report. A new board member-a wealthy woman with little business experience -questions the company's accountant about depreciation amounts. The new board member wonders why the depreciation expense has decreased from R220 000 in 2014 to R204 000 in 2015 and R196 000 in 2016. She states that she could understand the decreasing annual amounts if the company had been disposing of properties each year, but that did not occur. Further, she notes that the growth in the city is increasing the values of the company properties.

Required:

Prepare a response to the new board member's concerns. Also indicate why the company is recording depreciation when the property values are increasing?