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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBR Exams › depreciation after revaluation
Hello,
I have read that in a situation where an asset is revalued, IAS 16 allows for a transfer of an amount equal to excess depreciation to be made from the revaluation reserve to retained earnings. So I would like to confirm……..is it that the entity has a choice between 1.doing that and 2.charging the depreciation to the profit & loss?
Also, if they do indeed have a choice then what determines the treatment chosen by the entity?
Thanks
Hi,
Yes the treatment is optional but most companies would elect to do it as it transfers a non distributable reserve (revaluation surplus) to a distributable one (retained earnings) and is therefore in the shareholders best interests.
Thanks