BPP q136 Laurel

I don’t have any material in which I could find the Laurel question

Does the BPP material give you an exam reference?

This looks to me that you have mis-interpreted the scenario

The assets has a fair value of 57 as at date of acquisition but had a carrying value of only 45 as at that date

So what we’re looking at is a fair value adjustment of 12

Now the question is ot clear from your post

Is the 45 carrying value being depreciated over 6 more years or is the carrying value of 45 net of 2 years’ depreciation and now being depreciated over the remaining 4 years

In gfact, if I were really comprehensive , I could see that the carrying value as at date of acquisition was BEFORE that second year’s depreciation has been accounted for

So …

… are we looking at 45 revalued to 57 to be depreciated over 6 years, or

45 revalued to 57 to be depreciated over 5 years, or

45 revalued to 57 to be depreciated over 4 years

I would need to see the question to be able to be definitive about this

But that 12,000 is nothing at all to do with depreciation – it’s a revaluation

Ah – now I’m beginning to understand

The revaluation from 45 to 57 was done 3 years ago as at the date of acquisition – it was presumably a fair value adjustment and the asset was 2 years old at that date

The asset that was originally being depreciated over 6 years still had a further 4 years of estimated useful life as at date of acquisition

It is good practice, though not a requirement, that as a revalued asset is used over time, the additional / excess depreciation that is being charged on the asset because of the revaluation should be transferred from revaluation reserve to retained earnings

Think of it as compensation for the retained earnings because the various profit for the years since revaluation are being artificially reduced as a result of that additional depreciation

Is that better?