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(iii) Non-current assets:
Cavern revalues its land and building at the end of each accounting year. At 30September 2010 the relevant value to be incorporated into the financial statements is $41.8 million. The building’s remaining life at the beginning of the current year (1 October 2009) was 18 years. Cavern does not make an annual transfer from the revaluation reserve to retained earnings in respect of the realisation of the revaluation surplus. Ignore deferred tax on the revaluation surplus.
Value as at 30 September 2009 is 36000(Building) and 7000(Land) – 43000In the answer they have just revalued the land by 800(the difference in Carrying Value with and without revaluation) but how will we know from the question that just the land is to be revalued? kinda confusing
The figures / information that you have given me doesn’t make sense! I need more, sorry
sir i copied that from the question given. Thats the thing I’m not able to get. They just gave note same as above and carrying values at the year start 36000 for buildings and 7000 for land. Paper dec 2010
“In the answer they have just revalued the land by 800(the difference in Carrying Value with and without revaluation) but how will we know from the question that just the land is to be revalued? kinda confusing”
How do you reach that conclusion?
The trial balance tells us the break down of the brought forward figures (7,000 and 36,000)
Here are relevant extracts from the question
“Note (iii) Cavern revalues its land and building at the end of each accounting year. At 30 September 2010 the relevant value to be incorporated into the financial statements is $41·8 million. The building’s remaining life at the beginning of the current year (1 October 2009) was 18 years.”
And from the trial balance, we have:
“Land and buildings at valuation – 30 September 2009: Land ($7 million) and building ($36 million) (note (iii)) $43,000”
The 36,000 buildings are to be depreciated by 2,000 bringing the two carrying values to 7,000 and 34,000, a total of 41,000
And we’re told that “At 30 September 2010 the relevant value to be incorporated into the financial statements is $41·8 million” so we need a revaluation of 800
What makes you think that that 800 relates purely to land? And, if it did, it would be a revaluation downwards because the brought forward figure is 800 positive and we are not told the carry forward figure!
OK?
Oh okayy..yeah got it. Thank you.
Sir one more. When recording assets held under finance leases the amount is lower of fair value and pv of lease payments but usually i get an amount which around $200-$300 but still as it is close to fv is it acceptable to record it at fv or at pv of payments?
Are you asking that, because fair value and present value are similar, you can choose whether to record it at either one or the other?
If that’s your question, the answer is “No” If you have worked out present value, and it’s lower than fair value, why record it at fair value?
It’s like asking me “If I have to do something one way, because that’s the rule, is it ok if I do it my way instead?”
Come on! You’re not Frank Sinatra!
No sir, I obv don’t want to use my own rule. But usually there is very less difference b/w both and when this is so although the pv is lower still fv seems to be taken in the answer schemes.
Like for eg. FV of an asset held under finance lease is 25000. Initial deposit 2000 and payments of 6000 at every year end for 5 years
now here the pv is 24740 as per my calculations which is hopefully correct but still fv seems to have been taken as asset value in the answer scheme. : (Where’s this question from – give me a reference, please
And, given that this topic has nothing at all to do with “Revaluation” – the subject of this thread, it would have been a lot more sensible to start a new thread! Don’t you think so?
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