Jack Straw, a director in ABC Ltd, has suggested that the accounting treatment for two items be changed in the next set of financial statements. These are summarized as follows:
1. The first is goodwill. This has not been incorporated in the financial statements before. Jack Straw is suggesting that the goodwill is capitalized as a non current asset. He argues that this would more accurately reflect the additional value resulting from the potential benefits that can be gained from the strong trading positions of several of the business’s branches and also the quality of management experience in the business.
2. The second is depreciation. Jack Straw is arguing that the value of buildings is increasing every year and hence it makes no sense to depreciate them. Depreciation is reducing profits, when in fact the company is performing better because of the market price increases.

Required
a. Briefly explain your understanding of each of the following:
i. Goodwill;
ii. Depreciation.
b. Discuss the acceptability of each of the above suggested accounting policies. Your answer should consider the guidance under the relevant standards and Conceptual Framework.