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Hi can anyone pls help / direct me to correctly understand Asset revaluations.
My understanding is that when an asset is revalued;
If surplus;
Dr Asset
Cr Reval. reservevisa versa if deficit.
Any amount for period in the reval reserve will show up in the period’s ‘other comprehensive income statement’
All except where revaluation loss is greater than what is in the reserve / or if surplus reverses a prior loss – then instead of crediting / debiting reserve amount is taken to Income statement.
I have looked at Llama Dec 2007 F7 Q2.
How would one know that this $3M reval deficit is to go to ‘other comprehensive income’. (i.e not be charged to Income statement)? Is it because the question does not convey the balance of the revaluation reserve?
Your response is much appreciated as I need to get a clear rule for exam questions of when the income statement is charged and when the amount show’s up in ‘Other comprehensive Income.’
with devaluations,
decrease revaluation reserve with the balance already in there
any amount left should be debited to income statement
for eg
building cost 15000
revalued at the end of yr 1 = 20000
revalued at the end of yr 2= 12000yr 1
debit asset – 5000
credit revaluation reseve- 5000yr 2
debit revaluation – 5000
debit income statement – 2000
credit asset- 7000if there was no prior revaluation reserve , income statement would have been debited for 7000
Hi gutsychyk,
Thank you for your post, however it doesn’t pin-point the answer to my question.
I think I understand the basic treatment of revaluations but am a bit unsure about the past exam questions where we are not given the balance of any prior revaluation reserve – like Llama Dec 2007 exam question – and yet the deficit is not charged to the income statement.
Do you know why this is?
Thank you for your post, however it doesn’t pin-point the answer to my question.
I think I understand the basic treatment of revaluations but am a bit unsure about the past exam questions where we are not given the balance of any prior revaluation reserve – like Llama Dec 2007 exam question – and yet the deficit is not charged to the income statement.
Do you know why this is?
Hello anusiona,
You’d find the Revaluation Reserve balance in the Trial Balance. (Revaluation Reserve is a part of an equity), so as it is debited with the amount of 3000, you’d less it from the revaluation reserve.
Hi Anusiona,use Yahoo! and search – IAS Plus IAS16 Technical Release, then click on- IAS Plus/ Welcome to the world of Accounting,then scroll to -Yahoo! Groups Recent
posts,then click on-Technical Release IAS16 Property,Plant and Equipment,then go to the bottom and click on;Ads by Google;Technical Release by ACCA. Try to read the entire article.This helped to clear up some shady areas recently.ah, thanks sids for your help – I overlooked that.
thanks also drose.
very much appreciated!!
Question to gutsychyk.
building cost 15000
revalued at the end of yr 1 = 20000
revalued at the end of yr 2= 12000yr 1
debit asset – 5000
credit revaluation reseve- 5000yr 2
debit revaluation – 5000
debit income statement – 2000
credit asset- 7000Hi may be I dont understand it well or may be i am missing it somewhere to understand.
Can you please tell me how the asset is cr to 7000 when it has been devalued from 20,000 to 12,000.
sorry it would be / should be
yr 2
debit reval – 5000
debit i/s 3000
credit 8000
now does it make more sense?
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