Ch 2 Revaluation loss recognition.

Sorry! I must have missed this post, apologies. What you have done is fine with the entry, as you are taking some of the loss through the revaluation surplus and the rest through profit or loss. I'm just trying to highlight the impairment loss itself and where it is being split between OCI and P or L. Glad you are appreciating the responses, keep up the excellent work and you'll do very well in the exam. Thanks

Revaluation losses are recognised in the income statement. The only exception to this rule is where a revaluation surplus exists relating to a previous revaluation of that asset. To that extent, a revaluation loss can be recognised in equity.

You said sir, that my entry is fine, which is mentioned above. So what is going to be the presentation of statement of financial position and profit or loss statement in that case? Thank you in advance.

Try it out yourself and then I can correct any errors, if at all you make any. Thanks

Dear Chris, I hope you are safe and well, First of all I would like to thank you for your appreciated effort and informative lecture, in regards to revaluation loss, I am going to present example 2 and its solution of the financial statement. Could you correct any error of the following entries and the presentation of the financial statement,please? Given information. On 01.01.2013 PPE=$12000 Residual value =0 Expected useful life =10 Yrs, 31.12.2014 The asset was revalued at its fair value to be $14000 On 31.12.2015 The asset was revalued at its fair value to be $8000 Required the financial statement for the year ended 31.12.2015 Solution Assets carrying value before the first revaluation as follow =the original value less the accumulated depreciation. Accumulated depreciation =(12000/10yrs) x 2yrs = $2400 Then the carrying value = 12000-24000=9600 On 31.12.2014 at the date of revaluation Gain of revaluation = $14000-$9600 =$4400 Cr:Gain on revaluation (OCI) $4400 Dr:Accumulated depreciation(SFP) 2400 Dr: P.P.E SFP (balancing figure) 2000 The depreciation Expense for the year of 2015 Annual depreciation expense =(14000/8yrs) =1750 Dr Depreciation expense (SPL) $1750 Cr Accumulated Depreciation (SFP) $1750 by the end of the year gain on revaluation account is going to be closed to Revaluation surplus account in the equity section through the following entry Dr Gain on revaluation (OCI) $4400 Cr Retained earnings (SFP) $4400 At the end of the year we should increase the profit of the year through the retained earning account due to the excess depreciation expense charged to the profit or loss account due to the increase in the value of the PPE due to the revaluation surplus Then, Excess depreciation =$1750-1200=550 Dr revaluation reserves 550 Cr Retained earnings 550 The financial position before the 2nd revaluation AT 31.12.2015 **Statement of the financial position PPE(NCA) 12250 Revaluation Reserves(Equity section) 3850 **Statement of the profit or loss Depreciation expense(SPL) 1750 Gain on revaluation (OCI) 4400 At the date of the 2nd revaluation On 31.12.2015 the value of the PPE was fallen to 8000 Impairment loss =$12250-8000=4250 Cr Accumulated depreciation (SFP) 4250 Dr Revaluation Reserves (SFP) 3850 Dr Impairment loss (balancing figure) $400 The presentation of the financial statement after the second revaluation n 31.12.2015 **Statement of the financial position PPE $8000 Revaluation Reserves $0 **Statement of the profit or loss Depreciation expense $1750 Impairment loss $400 Could you sir check out the presentation of the financial statement at 31.12.2015 and tell me the errors, please? Sorry for the long question and your time, Thank you so much.

Wow! That looks perfect, well done. You've fully understood how to do the impairment of a previously revalued asset. Thanks

Dear Chris, I hope you are safe and well, Regarding the impairment loss that you have mentioned in your informative lecture in the 2nd revaluation process in the Statement of the profit or loss and other comprehensive income as per my entry above in the last comment I have just mentioned one impairment which is recognized in the profit or loss $400 at 31.12.2015. and I have deducted the amount of the revaluation surplus but I want to say shall I do recognize first the total amount of the impairment loss in the statement of profit or loss and other comprehensive income and then close the impairment loss in the revaluation surplus as follow, Cr Accumulated depreciation $4400 Dr Impairment loss(OCI) $3850 Dr Impairment loss (SPL)balancing figure $400 and in this case we are going to create a new account in the chart of account regarding the impairment loss and must be classified as OCI account. so we have two account regarding the impairment loss the first one Is classified normally under the profit or loss and the second impairment loss is classified under OCI. and just such like the revaluation gain by the end of the year should be closed in the revaluation surplus account in the equity section of the balance sheet. Dr Revaluation Surplus (SFP) $3850 Cr Impairment loss (OCI) $3850 Could you check out my work out? if am I wrong or right, because I have doubt about to recognise the impairment loss in the statement in the profit or loss and OCI first then close such amount In the revaluation surplus account at the end of the year. Thank you in advance.

Hi, Do you not have a model answer that you can compare your workings to? This should help you identify if you are correct or not. Thanks

Hello Sir, Please what is the double entry to record a revaluation loss which is more than prior year gain. Eg. prior year gain is $1000 and current year loss is $1500

Hi, DR OCI $1,000 (removing the prior year gain) DR SPL $500 (remainder of the loss posted through profit or loss) CR Asset $1,500 Hope that helps. Thanks