We are talking about historical cost principle

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Reference no: EM131192436

How to respond to this comment? We are talking about historical cost principle? Yes when a company holds the value of real estate over years it is going to do nothing but appreciate. As you said referring to machinery vs real estate items like that will depreciate over time because they are being used and worn down and are no longer new. Real estate holds it value and increases because you can just make improvements upon the area. Neighborhoods or companies around that area will being the value up and sometimes down but that is a rare case in today's market. Using this principle and hold the value over years will just hurt the company in the long run since there are no gains to be made on the land or building just the business that is inside. So if they fail at the business and have to sell the property it is going to be a double loss on their part just by using this principle.

Reference no: EM131192436

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