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pg 139 – 140 in 2013 F3 text seems to concise to me to make sense of properly.
mainly why is there transfer of funds from the revaluation reserve to the retained earnings ?
Revaluation reserve is charged to equity, retained earnings is the part of equity..
It would be better if you please post the specific para of the book or the case you want to discuss..
“the excess of the new depreciation over the old depreciation charge should be transferred from the revaluation reserve to retained earnings (within the equity section of the SOFP)
Dr Revaluation Reserve
Cr Retained earnings”
pg 139.I understand what to do, but I dont understand why this is necessary ?
“6) If assets are stated at revalued amounts, the following should be disclosed:
..
– the carrying amount that would have been recognised had the assets been carried at cost”
pg 141Also what does this mean?
It is part of the IAS 16 PPE Disclosure.I remember coming across this a few times; however, I don’t think it has ever been examined! When an asset is revalued, the difference in the new depreciation with the old depreciation goes to retained earnings – I think – but I would not worry about it. Even on the higher papers the question stipulates the company does not make a transfer of excess depreciation on revalued assets to retained earnings.
IAS 16 PPE is the international standard for ‘Property, Plant and Equipment.’ Disclosures are made to enhance the usefulness of the accounts. There would be a note e.g note 1. next to the PPE line on the SOFP, and you would do a break down of the net book value of the assets, showing the original cost and depreciation.
From your last comment, I would think the standard wants a disclosure of its original cost less depreciation, so you would disclose this as a note and show the asset at its fair value (revalued amount) on the SOFP.
Do you really need to know this for F3?
Thanks for the reply.
Its in the latest F3 book.. It may not be in the syallabus, but when I read a book I like to understand what I’m reading !
It does question you on topics not introduced properly a few times, which is annoying and slows down reading a little bit. Maybe it’s because the chapters have been rearranged in this edition. But overall it seems a good book and maybe the best out there for the exam.
Nevermind, I’d understand it if I had more examples on why this transfer takes place but not going to waste time on it..
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