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July 21, 2020 at 4:27 pm
The answer to this question (Example 4) in the notes does not include the Gain on Revaluation/Revaluation Reserve in the way that Example 1 and the video lecture answer both do – as part of the extracts we are preparing.
Is there a reason the Revaluation Reserve/Gain on Revaluation might not be shown as part of the answer in the notes?
July 3, 2020 at 7:52 pm
Thank you Sir!
March 29, 2020 at 1:07 pm
Hello Chris, me my concern is one, why didnt we add the historical cost of land of 5m to make it 40m then deduct it from 47000 to get 7000 but instead took only the historical value of Buildings less Acc depreciation and subtracted it from the Total revaluation amount of both land and buildings to get 12000?
May 23, 2020 at 6:16 am
Yes, this is also my question first he added up L & Bld. & get the total revalued amount of 47k it’s clear but why he has taken only Bld. historical cost to calculate the revaluation gain & get 12k & it was supposed to be 7k…?
June 16, 2020 at 1:35 am
Because land never depreciate
October 23, 2019 at 3:15 pm
Hi sir, i wanna know why there is no adjustment for excess depreciation while calculating revaluation,while we had it in the past sums.
December 11, 2019 at 11:36 pm
This is because this question has specifically asked us to not include it. If you were to read the last line of the first para under ‘Non-current Assets:’ it says that
“Kandy does not make an annual transfer to retained profits to reflect the realization of the revaluation gain.”
In the real world, whether or not the excess depreciation is transferred to retained earnings is a matter of company policy. In the ACCA exams though, unless they ask us specifically not to, we should always transfer the excess depreciation from the revaluation reserve(surplus) to the retained earnings.
Dr. Revalutation Reserve Cr. Retained Earnings
October 1, 2019 at 6:06 pm
Thank you opentuition
September 8, 2019 at 3:32 am
Why didn’t we reduce our balance or revaluation reserve of 12000 with the difference of our historic and current depreciation? Or am I missing something ? Thank you
September 25, 2019 at 10:51 am
Because no annual transferred is made.
July 29, 2019 at 12:02 pm
If it was ask to transfer to retain earnings then:
1. would the surplus on revaluation be $12000-2600=9400 and retained earning to 2600.
2. oci would then be 9400 ?
Thank you, Avinash.
July 4, 2019 at 7:07 pm
hi chris, under the historic cost, you deducted acc.depreciation (20000) from cost of land and building (55000) to give the CV @y/e sept. 13 my question is (1). why is the cost of land (5million) not deducted from total cost (55million) since land is not depreciable. i want to believe that the acc.depn is only related to the building.
(2). why not use the CV @y/e sept ’13 (35million according to your workings) to calculate depreciation instead of the revalued amount (39million).
July 4, 2019 at 9:35 pm
The calculation looks at a combined revaluation of the land and buildings. So the CV at Sept’13 is that of both the land and buildings, and the accumulated depreciation has only been calculated on the cost of the building.
Depreciation is calculated on the revalued amount, as per IAS 16.
June 4, 2019 at 8:15 am
Hi Chris, I have one doubt. In the question it says kandy doesn’t make annual transfer to retained profits to reflect the realisation of the revaluation gain so my question here is why did you take the amount of revaluation gain on Statement of Financial Position and not considered anything for gain on depreciation?
June 4, 2019 at 7:44 pm
It would usually say within a question if it does or doesn’t make the transfer, but it is best practice to do so. Therefore, if it does not say then I’d still make the transfer to go along with best practice.
December 17, 2018 at 11:58 am
I have a question if any one can answer with references.
X company with 2000 staff (Taxi drivers) has own staff accommodation building (Fixed Asset) and never charged rent to its p&l.
Now management of X company want to move staff accommodation to another asset management (AM) company and AM company will charge rent to company X going forward.
X company want to do this so that they can identify how much revenue the asset is generating.
Want to know if this is allowed in accounting as this is a operating asset, if yes please clarify how with reference.
December 17, 2018 at 4:57 pm
I’m not too sure how this is relevant to the video above on PPE, and I’m not too sure that it relates to the FR exam. It looks to me like you’re seeking some form of business advice and we aren’t here to provide it, sorry.
July 18, 2018 at 12:19 pm
Hi Chris, I think I am getting hung up on the distinction between Revaluation Reserve in SOFP/Equity and in SPLOCI. Specifically its technical use when posting journals. I understood:
DB – Non-Current Assets – increase with diff. revalued amount – actual cost DB – Accummulated Depr – reverse depr. to date CR – Revaluation Reserve (Equity or OCI?) – increase in value + acc. depr.
IF we are instructed to adjust shareholder’s wealth by depr. increase:
DB – Revaluation Reserve (Equity or OCI?) – depr. increase since reval. CR – Retained Earnings – depr. increase since reval.
I left depreciation journal out as it’s per usual only with the increased rate.
I think I am getting confused because I see you presenting the reserve and gain separately in the results of your workings.
Hope you understand my question and it makes sense?
September 26, 2018 at 8:28 am
Could you explain it for us, sir? I am confused about the “Retained Earning” that you ‘ve mentioned too.
September 26, 2018 at 7:41 pm
When we make the initial revaluation gain we record the gain in the revaluation reserve/surplus. The gain is presented through OCI, and then this gain is added to the opening revaluation reserve in the SOCIE.
For the excess depreciation your journal is correct.
June 8, 2019 at 2:04 pm
Why the revaluation reserve in this example, not $11.4m?
There is one way I could estimate the excess depreciation and that is using remaining life (given 15 years as at 1.Oct.13) to calculate the depreciation basis historic cost; i.e. $[2.6m – (30/15)] = $0.6m.
June 8, 2019 at 2:06 pm
Also, logically, any upward revaluation would lead to an excess depreciation, almost always!
June 8, 2019 at 2:07 pm
September 30, 2019 at 6:50 am
Professor Chris, please reply to the question. I am also so curious about it.
September 30, 2019 at 6:55 am
Professor Chris, your previous lecture answered this. Thank you.
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