"I'm human. It happens." This is lovely - it's the attitude I've seen at work among most accountants. In recognising human error we put controls in place to prevent them slipping through. And we know how to appreciate each other all the while. Thank you as always for a great lecture.
J
Jiselle·
I would like to know why the student below Dr PPE (SFP) with 1,000
"mariakurina says
June 9, 2020 at 2:53 pm
It will definitely be added to SFP.
But for revaluation entries are
Dr PPE (SFP) 1,000
Dr Acc depreciation (SFP) 500
Cr Reval surplus (SFP + OCI) 1,500"
M
Mohamed·
Investment Property (IP) revalued at fair value through profit or loss (PL): Under IAS 40, when an asset is classified as investment property and measured at fair value, any changes in its fair value are recognized directly in the profit or loss (PL). If you were to recognize these changes in OCI (other comprehensive income), it would create a misleading picture because the revaluation method for IP under IAS 40 does not allow for such treatment. Fair value changes are meant to impact PL immediately to reflect the economic reality.
OCI for PPE (Property, Plant, and Equipment): When it comes to PPE, the revaluation surplus (if the revaluation model is used) is recorded in OCI and accumulated in equity. It is only transferred to PL when the asset is sold or derecognized, aligning with the principles of matching income and expenses. This ensures that gains or losses are not prematurely recognized while the asset remains in use and on the balance sheet.
Transfer from PPE to IP: When a PPE is reclassified as IP under IAS 40 (paragraph 62(ii)), any revaluation surplus in OCI remains in OCI until the IP is sold. It cannot be transferred directly to PL, as that would lead to distortions in reported financial performance. Upon disposal of the IP, the accumulated OCI can then be transferred to retained earnings (RE), but it will not flow through PL.
Your approach is in line with IFRS standards and emphasizes transparency in financial reporting, preventing misrepresentation of gains or losses.
A
Amin·
For the SOFP, at Y.e, IP is increased by 21,600 to account for the revaluation at FV. Is it appropriate to also say that Property is decreased by (19,500) [FV after 500 depreciation] and IP shows 21,000 as at 01/07/15 to account for the "reallocation" of the property from admin purposes to investment purposes.
For example, there may be other properties under the ownership of the company but we only discussion to transfer of one property to IP, so In figure rather than ignoring property altogether in SOFP, it's better to address it's transfer to IP?
H
Hamza·
Liverpool!! oh yeahh you go Chris, anyways great lectures mate !!
H
Haider·
Dear Tutor,
Why haven't you shown the Revaluation Reserve under SFP for the $1.5m?
K
Konichan·
He did it
$1.5m go to SFPOCI under OCI section
S
Syam Krishnan Kamath·
In the study text (BPP) and other sources mention that a property that is under construction for future use as Investment Property is treated as Investment property and not as PPE uner IAS 16!!
https://www.iasplus.com/en/standards/ias/ias40
H
haider·
Amount in OCI, does it get recycled to P&L? thanks
D
Dean·
Speaking of directly attributable costs,
if purchase tax is irrecoverable, it is capitalised. ???
I dont get it. Please help me.
Thank you.
A
aarti·
Yes, it will be capitalised as long as it is irrecoverable.
A
abdullahkhan0·
if a property is classified as IP valued under cost model, do we have to depreciate the property?
A
aarti·
Investment properties should initially be recognised at cost. However, for subsequent measurement we have 2 options under IAS 40, one is cost cost model and the other being fair value model. Once a method has been chosen it should be applied consistently and to all investment properties.
Now, in case of cost model, investment property would be depreciated normally like any other property, plant and equipment. No year end revaluations would be accounted for, unless it is downward, in which we would record an impairment loss(Dr SPL).
V
vijaya·
In a fair value model, you revalue the asset at each year end, so there is no requirement to charge depreciation
A
Anna·
Hi,
With reference to the inventory transfer to IP - so we calculate the difference between cost/nrv (depending on what's lower) and FV and this difference goes to SPL?
Thanks,
Anna
N
Nomad·
Also the gain on PPE is 1500 and it comes under OCI right. But at the same time shouldnt it comes under Revaluation Reserve as 1500 in SFP ?
N
Nomad·
I didnt know that you were a liverpool fan <3 .
Hope they gonna raise the PL trophy this season. Btw your lectures were amazing!!!
M
Matt·
Hey, you realised there was a mistake - depreciation should be 1000, but then you didnt change it to 1000, you left it as 500, so the answer is wrong.
P
P2-D2Tutor·
Hey, there is no mistake as the change in usage took place half way through the year and so we only have 6 months of depreciation, which is 500 and not 1,000 as you state.
P
priya·
Hi sir
19500-21000=1500
is 1500 revaluation surplus?
P
P2-D2Tutor·
Hi,
For a change in use from PPE to IP we revalue under IAS 16 before the transfer to IP, therefore the revalution will go through other comprehensive income (revaluation surplus).
Thanks
M
Michael·
Hello Chris,
Thank you for the video.
In relation to the 1,500 OCI surplus. Would you also have to add to the SOFP a Revaluation Surplus of 1,500 in equity? Because the journal is:
Dr PPE (SOFP) 1,500
Cr Revaluation Surplus (SOFP and OCI) 1,500
And the journal to record the Gain on the Investment Property is:
Dr PPE (SOFP) 600
Cr Gain on Investment Property (SPLOCI) 600
Is this correct?
S
sabina1717·
Thanks for the lecture, the only thing I want to ask is the following.
As you said, if owner occupied property is transfering to IP then it is revalued under IAS 16 and then treated as IP.
So, on 1st of July it was transferred to IP and its cost was 19.5k and NRV (fair value) was 21 mln. Why we dont take the lowest one which is 19.5?
P
P2-D2Tutor·
Hi,
Glad you're finding the lectures useful.
We revalue to fair value, which here is the 21 million, so will use this figure.
Thanks
G
gbm78·
Is it correct to take the 19.5k instead of the 21 million if we were transferring from IAS 16 to IAS 2?
Great video.
Thanks
"mariakurina says
June 9, 2020 at 2:53 pm
It will definitely be added to SFP.
But for revaluation entries are
Dr PPE (SFP) 1,000
Dr Acc depreciation (SFP) 500
Cr Reval surplus (SFP + OCI) 1,500"
OCI for PPE (Property, Plant, and Equipment): When it comes to PPE, the revaluation surplus (if the revaluation model is used) is recorded in OCI and accumulated in equity. It is only transferred to PL when the asset is sold or derecognized, aligning with the principles of matching income and expenses. This ensures that gains or losses are not prematurely recognized while the asset remains in use and on the balance sheet.
Transfer from PPE to IP: When a PPE is reclassified as IP under IAS 40 (paragraph 62(ii)), any revaluation surplus in OCI remains in OCI until the IP is sold. It cannot be transferred directly to PL, as that would lead to distortions in reported financial performance. Upon disposal of the IP, the accumulated OCI can then be transferred to retained earnings (RE), but it will not flow through PL.
Your approach is in line with IFRS standards and emphasizes transparency in financial reporting, preventing misrepresentation of gains or losses.
For example, there may be other properties under the ownership of the company but we only discussion to transfer of one property to IP, so In figure rather than ignoring property altogether in SOFP, it's better to address it's transfer to IP?
Why haven't you shown the Revaluation Reserve under SFP for the $1.5m?
$1.5m go to SFPOCI under OCI section
https://www.iasplus.com/en/standards/ias/ias40
if purchase tax is irrecoverable, it is capitalised. ???
I dont get it. Please help me.
Thank you.
Now, in case of cost model, investment property would be depreciated normally like any other property, plant and equipment. No year end revaluations would be accounted for, unless it is downward, in which we would record an impairment loss(Dr SPL).
With reference to the inventory transfer to IP - so we calculate the difference between cost/nrv (depending on what's lower) and FV and this difference goes to SPL?
Thanks,
Anna
Hope they gonna raise the PL trophy this season. Btw your lectures were amazing!!!
19500-21000=1500
is 1500 revaluation surplus?
For a change in use from PPE to IP we revalue under IAS 16 before the transfer to IP, therefore the revalution will go through other comprehensive income (revaluation surplus).
Thanks
Thank you for the video.
In relation to the 1,500 OCI surplus. Would you also have to add to the SOFP a Revaluation Surplus of 1,500 in equity? Because the journal is:
Dr PPE (SOFP) 1,500
Cr Revaluation Surplus (SOFP and OCI) 1,500
And the journal to record the Gain on the Investment Property is:
Dr PPE (SOFP) 600
Cr Gain on Investment Property (SPLOCI) 600
Is this correct?
As you said, if owner occupied property is transfering to IP then it is revalued under IAS 16 and then treated as IP.
So, on 1st of July it was transferred to IP and its cost was 19.5k and NRV (fair value) was 21 mln. Why we dont take the lowest one which is 19.5?
Glad you're finding the lectures useful.
We revalue to fair value, which here is the 21 million, so will use this figure.
Thanks
Great video.
Thanks