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Impairments – Impairment (specific asset) – ACCA Financial Reporting (FR)

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  2. Hi,

    subsequent to second revaluation, Dec 31, 20×7, the closing balance of Accumulated Depreciation should have been $150,000 (75+75), therefore, NBV of PPE was $975k.

    That been said, and with reference to your explantion of closing balances of accounts affected after second revaluation, where which the PPE shall be reported at $ 600,000 as a net book value, what would the gross Net Book value and Accumulated Depreciation?

    Many thanks,
    Mirza

    • Hi . General reserve is referred to as the reserve fund that is created by keeping aside a part of profit earned by the business during the course of an accounting period. In this case revaluation gains.

      If an asset is impaired we can charge the impairment loss to general reserve but only up to the value that the revaluation gains have at the time of the impairment.

  5. hi Sir,
    thank you so much for teaching us i just have one question, why did we deduct 325 as impairment ( OCI ) ? we already used that from the surplus which cancels it off and remaining 50 as impairment why did we deduct 325 from OCI?

    • 325 was already in OCI from previous revaluation and subsequent transfer of excess depreciation, at the start of year 20×7, so to net it off at the end of year we first set of 325 of Impairment to OCI and remaining to SPL

      • okay thanks
        i didnt know oci carrys balance as well because i thought even oci is yearly basis

  8. Hi

    Can we not show Impairment at Nil in Other comprehensive income as we had 325 income and Loss of 325 in current year.

    Will this be incorrect representation

    • I don’t think it would be a mistake, but showing Nil could gain some marks. It would show the reviewer that you understand that OCI was some number before, and after entries there’s nothing left.

  15. The depreciation charge for the year that was recorded in the Statement of Profit or Loss for the year ended 31st Dec 20×7 should have been 50,000 rather than 75,000. The company wishes to transfer the excess depreciation charge to retained earnings directly from the revaluation surplus reserve.

  16. The sentence below wasn’t use in the solution:
    The company opts to transfer any excess depreciation on the revalued amount to retained earnings.
    I think the 25, 25 excess will not be charged from the surplus. Pls I need more light on that.

    Thank you

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