- This topic has 4 replies, 5 voices, and was last updated 11 years ago by
.
- Posts
Hi – please help, am confused……………
Kaplan expandable text (page 148):
“An upward revaluation should be credited to the revaluation surplus, unless it reverses a previous downward revaluation which was charged as an expense.A downward revaluation should be charged as an expense, unless it reverses a previous upward valuation, when it may be charged against the revaluation surplus for that same asset”
Surely – if an asset has been revalued already and already had either an upwards or downwards revaluation posted in the revaluation surplus, if it is then revalued at a later date (regardless of whether this new revaluation is upwards or downwards) this new revaluation gain or loss should also be posted in the revaluation surplus so the net position is the accurate current valuation of the asset?
Any help will be gratefully appreciated!
As part of accounting, expenses are recorded once they are FORESEEN. Gains are not recorded until REALISED(Prudence Concept). So if an asset is revalued downwards, its like we have forseen an expense therefore it has to be recorded. If an asset is valued upwards, we have not realised the gain, therefore we only record it under reavaluation surplus.
- Topics: 0
- Replies: 7
- ☆
Say for example you have a PPE called A at cost $ 100 and PPE called B at cost 50 ..You asked a revaluer to revalue it. He said the currently PPE A cost $130 and PPE B currently costs 70. So there has been a revaluation gain of 30 on PPE A and gain of 20 in PPE B.
The shortcut entry will be
Dr PPE (20+30)
Cr Revaluation Surplus (50)In the next year you acquired PPE C for $ 80, now you have three PPE for
A $130 B $ 70 and C $ 80. Now you ask a revaluer to revalue the PPE. The revaluer results are A $130 B $ 50 C $60The short cut DR entry for B
PPE Cr 20
Revaluation surplus Dr 20However for C
PPE Cr 20
Income statement Exp (impairment) Dr 20.Hope this working illustrates the text of kaplan…
- Topics: 0
- Replies: 1
- ☆
let say,
a company owns two assets at their bookvalue as on dec 31, 2010, yr end.
Asset A: $2000
Asset B: $2500on the same day on revaluation it was discovered that assets should be valued at:
Asset A: $2200
Asset B: $2400so following entries were passed:
Dr; asset A 200
Cr: rev. suplus 200Dr: impairment loss (PnL / income statement) 100
Cr: asset B 100revised summary aftr revaluation as on dec 31, 2010
asset A 2200
asset B 2400at the end next yr. i.e on dec 31, 2011 assets were valued at ( after deducting , supposed,depreciation):
asset A 2100
asset b 2300but on same day on revaluation it was discovered at assets should be valued at:
asset A 1800
asset B 2500
so entries should be:
Dr: rev surplus 200
Dr: impairment loss 100
Cr: asset A 300practical interpretation of:
A downward revaluation should be charged as an expense, unless it reverses a previous upward valuation, when it may be charged against the revaluation surplus for that same asset”
i.e we made a reversal of previous upwarward revaluation of 200 which was charged as revaltn surplus,, and watevr remained in excess that is raised as an expense, as an impairment loss of 100.now entry for asset B:
Dr: asset B 200
Cr: impairment loss (pnl / income statement) 100
Cr: rev surplus 100
practical interpretation of:
“An upward revaluation should be credited to the revaluation surplus, unless it reverses a previous downward revaluation which was charged as an expense.i.e we made a reversal of previous downward revaluation of 100 which was charged as an expense, and watevr remained in excess that is raised as revaluation surplus in the account.
i hope my contribution will help to you n all others.
cheers!!🙂
- You must be logged in to reply to this topic.