The City of Martinsville donated land to Essex Company. The fair value of the land was $100,000. The land had cost the city $45,000.

Required:

1. Describe the current accounting treatment fo the land. Include in your answer the amount at which the land would be valued by Essex Company and any other income statement or balance sheet effect.

2. Under the recommendations outlined in SFAS No. 116 (see FASB ASC 720), the FASB required that donated assets be recorded at fair value and that revenue be recognized equivalent to the amount recorded for a donation.

a) Defend the FASB's position. In your anser, refer to the conceptual framework.

b) Criticize theh FASB's position. In your answer, refer to the conceptual framework.