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sir,
1)When we switch from cost to revaluation model, we account for the change prospectively, right? We revalue the asset, and state it at it’s revalued amount less any FURTHER accumulated depreciation and impairment losses from the date of revaluation. We compare the cost less accumulated depn of the asset with it’s revalued amount, and debit the asset and credit the revaluation reserve with thr difference, right?2) Also, isn’t the above a change in accounting policy? Then why are we not accounting for it retrospectively?!
Thanks in advance.
Impracticability appears to be the justification for not restating prior periods!
Extracts from IAS 8:
“Changes in accounting policies
An entity is permitted to change an accounting policy only if the change:
……. then the change in accounting policy is applied retrospectively.
Retrospective application means adjusting the opening balance of each affected component of equity for the earliest prior period presented and the other comparative amounts disclosed for each prior period presented as if the new accounting policy had always been applied.
However, if it is impracticable to determine …… the entity shall apply the new accounting policy to the carrying amounts of assets and liabilities as at the beginning of the earliest period for which retrospective application is practicable, which may be the current period, and shall make a corresponding adjustment to the opening balance of each affected component of equity for that period.
Also, if it is impracticable to determine the cumulative effect, at the beginning of the current period, of applying a new accounting policy to all prior periods, the entity shall adjust the comparative information to apply the new accounting policy prospectively from the earliest date practicable.
Disclosures relating to changes in accounting policies
Disclosures relating to changes in accounting policy caused by a new standard or interpretation include:
the amount of the adjustment relating to periods before those presented, to the extent practicable if retrospective application is impracticable, an explanation and description of how the change in accounting policy was applied.”
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