| Case 8-6 Valuing Assets Students should be asked to determine the impact of using the first appraisal versus the second appraisal. Both appraisals result in a total increase in assets of $200,000, but differ in the amount allocated to the land account. Students should see that a second opinion may have been necessary to accurately appraise the property, but, on the other hand, the appraisal may have been requested to maximize the amount allocated to the depreciable asset, the building. Students should be asked about the nature of the appraisal process. Is it possible for two appraisers to have different estimates of the fair market value? Should the accountant always accept the first appraisal? When is it acceptable to seek another opinion? Are Joe and Mr. Baylor unethical simply because they sought a separate opinion? The instructor may wish to draw a parallel to "opinion-shopping" on the part of clients who seek an opinion of auditors or public accountants. It appears that the concept of neutrality has been violated in this case. It is not wrong for Joe and Mr. Baylor to seek a second appraisal if their motive was to develop an accurate, unbiased measure of the land and buildings. However, if their motive was to minimize the amount allocated to the land account, their actions must be questioned. |