The use of net book value for plant assets promotes a more conservative approach to asset replacement when compared to gross book value.

Question

Quizplus · Accepted Answer

Net book value takes into account accumulated depreciation, which reflects the actual wear and tear on the asset over time. As a result, the net book value is typically lower than the gross book value, which only includes the original acquisition cost. This promotes a more conservative approach to asset replacement because it reflects the true value of the asset and the need for potential future replacement or updates.

The Use of Net Book Value for Plant Assets Promotes