Evaluation of the Accounting for Property, Plant, and Equipment (PPE)

GAAP requires the use of depreciated historical cost. As previously mentioned, this valuation does not reflect current market value. Accordingly, care must be taken when using this information. Lending institutions, for example, sometimes require loan applicants to pledge assets as collateral. In evaluating the adequacy of the pledged assets, historical cost is not particularly relevant; the loan officer is more interested in current market value.

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