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Hi!
I have a question related to problem from chapter 3.
I have a non current asset with a carrying value of 130K EUR, written down to 95 K EUR. The revaluation account contained already 25 K EUR related to this asset.In the statement of income, from answers I see only taken into account the 25K EUR.
It should not be also the loss of 35K EUR( 130 K – 95 K)? Where should this loss be recognised?
Thank you
Be careful not to get confused between the income statement (AKA the P&L) and the statement of other comprehensive income (which is an extension of the income statement where other income such as unrealised revaluation gains go).
When the property was originally revalued, the revaluation gain would have been credited to the statement of other comprehensive income.
When an asset which has previously been revalued upwards is revalued downwards, this is first debited against the gain that was previously credited to the statement of other comprehensive income. Any further loss is then recognised as a debit to the income statement.
Therefore in your example, 25k will be debited to the statement of other comprehensive income and 10k to the income statement.
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