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Hi Mike,
Im working through a cash flow and have a question.
One of the adjustments says, in 1st may 2014 the group revalued an item of ppe to its fair value of 12m. Cost of asset was 10m on 1st may 2012 with a useful life of 10 years. The life has not changed of the asset. The group performed a reserves transfer in respect of the extra depreciation arising from the revaluation.
The end of year for the comp is 30th april 2015.
From this i understand the carrying value of the asset at current is 8m. This is then to be revalued to 12m. This will then be depreciated over 8 years which is 1.5m per year.
My question is do i add this depreciation of 1.5 to the figure of depreciation already given in another note?
If yes, i do not understand the group has performed a reserves transfer of the extra depreciation arising from the revaluation. What would i need to do here and will it affect the cash flow? If yes how?
Thank you
If the depreciation figure is given for the year for 30 April 2015, then why add some more?
Now let’s think about the annual transfer of the excess depreciation. How much CASH was paid out of the revaluation reserve and how much CASH was received into retained earnings?
I really don’t think I need to say more, do I?
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