Reference no: EM133151788

Question - Departures from GAAP - On January 1, TMC Company purchased land (the site of a new building) for $100,000. Soon thereafter, the state highway department announced that a new feeder road would run next to the site. The effect was a dramatic increase in local property values. Comparable land located nearby sold for $700,000 in December of the current year. TMC presents the land at $400,000 higher than historical cost with the same amount shown separately in the shareholder equity account Current Value Increment. The valuation is fully disclosed in a footnote to the financial statements with a letter from a certified property appraiser attempting to the $700,000 value.

Draft the appropriate auditors' report, assuming that you believe the departure from GAAP is material but not pervasive enough to cause you to issue an adverse opinion.