Free ACCA & CIMA online courses from OpenTuition
Free Notes, Lectures, Tests and Forums for ACCA and CIMA exams
Specially for OpenTuition students: 20% off BPP Books for ACCA & CIMA exams – Get your BPP Discount Code >>
July 8, 2022 at 7:39 am
When it comes to P&L effect of inflation the anser given is wrong because when their is inflation, the prices of our inventory and expenses purchases and the prices or our selling goods or other income are getting higher through the year, and so our profit margin might also go upwards and compensate for higher depreciation. So the right answer would be “It depends” !!!
September 24, 2022 at 9:36 am
Since, it being OT question not much information is given so according to question, we have to assume that inflated prices of inventory and expenses will be compensated by the increase in profit due to inflation.
And therefore, value of depn using HC OR CV will be the determining factors as to find if profits are overstated or understated.
October 16, 2021 at 4:08 am
Great information Delivery Sir, and I really enjoyed it! Thank you so much and it seems to be an exciting journey to clear FR paper with your great support!!!
August 7, 2020 at 11:25 am
so what if the price is low which is deflation ,the effect on both the historical & current value
March 5, 2019 at 6:36 pm
But when we follow current cost method, we will be revaluing the asset upward. Why didn’t we consider the effect of this upward revaluation on the profit?
December 7, 2021 at 6:19 pm
revaluation surplus will land in Other Comprehensive Income, and not in Profit. Revaluation affects Profit only through depreciation cost, which becomes higher if the value of the assets increase. Increased depreciation cost then causes the Profit to decrease.
July 18, 2018 at 2:37 am
Depreciation is lower based on the historical cost – as in the economy with growing inflation the cost will increase, so upon revaluation of your asset then your depn expense will increase
June 30, 2018 at 8:10 pm
Why is depreciation lower in economy with growing inflation?
August 16, 2018 at 3:33 pm
I presume it cause the asset is calculated at historical cost as against the current value. Therefore the asset is undervalued resulting in lower depreciation which will eventually increase profit.
You must be logged in to post a comment.