PPE – revaluation upwards – ACCA Financial Reporting (FR)
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This method on Example 1 is quite confusing comparing to what we have learnt in Financial Accouting. I prefer using the T account….
So should Retained earnings account be credited with the excess depreciation for the rest of the assets life or just in the first year of revaluation?
Good question, I was thinking the same.
I guess it should be only for one year.
Hi,
Is it a requirement in the exam to do the rounding?
Thanks for the lecture Chirs.
But why can’t we transfer excess depreciation through P&l?
Secondly I have come across with accountants who divide the revaluation surplus into remaining depreciation life and transfer it to P&L .
Dr RR and Credig P&l. Is this a correct treatment?
Thanks.
Q:But why can’t we transfer excess depreciation through P&l? – A:there is 5.558 which includes excess of 1.558 and it’s in SPLOCI
Q:Secondly I have come across with accountants who divide the revaluation surplus into remaining depreciation life and transfer it to P&L .
Dr RR and Credig P&l. Is this a correct treatment? – not sure what do you mean here, can you show an example
For example upward revaluation of 500k has been taken to 50k per year for 10 years.
Dr RR
Cr P&l
Also at 19.41 Time it says not through p&l but through Retained earnings.Why not through P&l.?
isnt the 1st depreciation for 4 years 01-01-2012…….31-12-2015
no, because you have 1st depreciation before revaluation for period 1/1/12-1/1/15 which is 3 yrs, and after revaluation period is for 1/1/12-31/12/15. How can you calculate entire dep’n for 4 years with two different values? you need to split first for two periods with different values
For revaluation journal entry can we do :
1. Dr PPE 15000
Dr ACC DEP 12000
Cr OCI 27000
Then
2. Dr OCI 27000
Cr Revaluation Reserve 25412
Cr Retainted Earnings 1588
I don’t think so, because 27mil is for ye 2014 and 25412 is for ye 2015. Unless if you are 4 years behind with your accounts and looking to post a journal this way as a quick fix haha