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Hi,
Re Q1 Ashanti taken from June 2010; could you kindly explain why $1.6m was added to OCI in relation to the PPE revaluation please?
During the year there was a revaluation loss of $3.6m. Since $2m was already in the revaluation reserve I reversed the $2m and it left me with $1.6m which I took to the Income Statement. I then deducted the $2m from OCI (which was reversed).
I cannot seem to understand why the $1.6m was added to the Income Statement and then added again to OCI.
Thanks.
Basically they said they charged all revaluation loss to OCI, so you have to reverse 3.6 by adding it back to OCI and then reversing the previous 2, net effect would be addition of 1.6 to OCI, and remaining 1.6 to be deducated from income statement ( its not added to income statement, it’s a loss so it should either add up in some other expense to reduce profit or shown separately as a deduction )
atab, there wasn’t 2m in the revaluation reserve. Yes, it started with a 2m revaluation (in fact it was a 2,200,000 revaluation) and that was followed by a devaluation to reduce carrying value down to 8m.
That revaluation / devaluation amounted to $3,560 which should first of all be charged against any balance in revaluation reserve relating to that specific asset. At the date of devaluation, the amount in revaluation reserve is $1,960 so that means that only $1,960 can be debited to revaluation with the rest (1.6m) having to be charged to the Statement of Income.
Why then is 1.6m ADDED to OCI!!!!
Because, according to the question, the whole of the devaluation has been recorded as a deduction from OCI. So the 1.6 balance needs to be added back to OCI and deducted from Statement of Income
Is that ok?
Yes I was referring to the 1,960 but I rounded it to 2 🙂 yes that’s all clear now thanks a lot for your help!
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