Question

Do you think it would make more sense in terms of depreciation of assets for us to follow IFRS, and use fair market value instead of predetermined depreciation amounts? Would fair market value be a better way of recording depreciation?

Answer 1

ANSWER:

YES, in my opinion the fair market value instead of predetermined depreciation amounts for depreciation of assets is a better approach of recording depreciation. Fair market value is defined as price that would be agreed to in an unrestricted and open market between willing and knowledgeable parties that are dealing at arm’s length who are completely informed and are not under any compulsion to transact. The fair value accounting uses information specific for the time and current conditions in the market. It attempts to give the most relevant estimates possible thus holds a great informative value for a firm itself and encourages corrective actions promptly. The main benefit of this approach is that non-current assets are depicted at their true market value in financial statements. Consequently, gives an accurate asset as well as liability valuation on an ongoing basis to users of the company's reported financial information. Thus in my opinion it is better way of recording depreciation