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Transfer from reevaluation reseve to retained earnings shown on the PLOCI

Forums › CIMA Forums › Transfer from reevaluation reseve to retained earnings shown on the PLOCI

  • This topic has 2 replies, 2 voices, and was last updated 7 years ago by Avatarsansechafaudage.
Viewing 3 posts - 1 through 3 (of 3 total)
  • Author
    Posts
  • June 17, 2018 at 7:38 pm #459186
    Avatarsansechafaudage
    Participant
    • Topics: 7
    • Replies: 5
    • ☆

    Hello,

    After watching the lectures on the financial instruments I have come to ask myself a question.

    Let’s say I buy an asset as available for sale on the year 20X1 for 100 CU and I pay 2 CU of transaction fees. I show my asset on my SOFP at 102.
    At the end of the year I revaluate the asset as fair value as 40 CU.
    So I do the following posting:
    Cr Financial Asset 62
    Dr Other comprehensive income 62

    On my comprehensive income statement I will show the loss of 62 in the Other comprehensive income part and on my SOFP I will have a debitor (negative) reevaluation reserve of 62.

    Then at the middle of 20X2 I sell the asset for 50 CU. So i do
    Cr Financial Asset 40
    Cr Gain on sale of investment 10
    Dr Bank 50
    And I transfer the -62 from reevaluation reserve to Retained earnings showing it only on the Statement of change in equity (not in the P&L or OCI)

    So I’ll show a gain on my P&L of 10 while my retained earning actually decreased by 52.

    Isn’t it a bit misleading? Or did I make a mistake in my example?

    June 17, 2018 at 8:04 pm #459191
    AvatarP2-D2
    Keymaster
    • Topics: 4
    • Replies: 7232
    • ☆☆☆☆☆

    Hi,

    Yes, it is all a bit misleading and the IASB has recently issued an exposure draft to try to correct the anomaly, but that is not on your syllabus.

    Thanks

    June 18, 2018 at 5:45 pm #459294
    Avatarsansechafaudage
    Participant
    • Topics: 7
    • Replies: 5
    • ☆

    Thank you!

  • Author
    Posts
Viewing 3 posts - 1 through 3 (of 3 total)
  • The topic ‘Transfer from reevaluation reseve to retained earnings shown on the PLOCI’ is closed to new replies.

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