'…When Profit Is Derived from Changes in Fair Values More

question 5

Essay

'…when profit is derived from changes in fair values more difficult questions arise for the auditor …' J.Godfrey,et el,'Accounting Theory',7^th Ed.p.150.
Discuss the implications for auditors of the shift in the focus of profit measurement from matching revenues and expenses to assessing changes in the fair value of the net assets.

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Definitions:

Depreciation Rate

The percentage rate at which an asset is depreciated across its useful life, impacting how much of its cost is allocated as an expense each year.

Accelerated Depreciation

A method of depreciation in which an asset loses book value at a faster rate than the traditional straight-line method.

Depreciation Expense

The portion of the cost of a tangible fixed asset allocated as an expense to a period, reflecting the usage and wear and tear of the asset.

Asset's Life

The expected duration of time that an asset is considered to be useful for the purposes of a business.