Query on impairment

We really need to know date of purchase, date of revaluation, residual (scrap) value and depreciation rates

Ok, I’ll make some up (I’ll complete the question!)

Bought on 1 January, 2010, 5 year estimated life, straight line depreciation, scrap value 40,000

Revalued after 2 years on 1 January, 2012, useful life not extended, scrap value remains at 40,000

1 January, 2013, damaged – impairment tested, value reduced to 200,000

Bought 1.1.10 300,000
Depreciation yr 2010 52,000
Carrying value 248,000
Depreciation yr 2011 52,000
Carrying value 196,000
Revalue 1.1.12 304,000 (credit revaluation reserve)
Carrying value 500,000
Depreciation yr 2012 153,333 ((500 – 40)/3)
Carrying value 346,667
Impaired 1.1.13 146,667 (debit revaluation reserve)
Carrying value 200,000
Depreciation yr 2013 80,000 ((200 – 40)/2)
Carrying value 120,000
Depreciation yr 2014 80,000
Carrying value 40,000
Scrapped 40,000
Carrying value Zero

As for the Revaluation Reserve, say the company DOES make an annual transfer between reserves to “compensate” retained earnings for having suffered “excess” depreciation charge

1.1.12 credit revaluation reserve on original revaluation 304,000
31.12.12 101,333 annual transfer debit revaluation reserve, credit retained earnings
Balance on Reval Reserve now 202,667
1.1.2013 146,667 impairment debit revaluation reserve
Balance on Reval Reserve now 56,000
31.12.13 28,000 annual transfer debit revaluation reserve, credit retained earnings
Balance on Reval Reserve now 28,000
31.12.14 asset disposed, final transfer debit revaluation reserve, credit retained earnings 28,000
Balance on Reval Reserve Zero

OK?

You’re welcome