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Hi Sir.
The question I want to ask is:
when the asset is revalued downwards does the reduction in depreciation affect the Equity as how the increase does?
In the example done in the lecture when the asset had increased in value the excess depreciation reduced the reserve in the equity section of the SOFP. However in the other example when there was an increase then a decrease in the PPE I did not see where it affected the equity only the OCI.
Can you please advise me on what would be the treatment for the equity when there is an increase then a decrease in the depreciation due the rise and then the impairment of the value of the asset
Hi,
If there is a revaluation downwards then the reduction is taken through profit or loss unless the asset has been previously revalued.
If the asset has been previously revalued then the downwards revaluation is firstly taken to the revaluation surplus and if this is then reduced to zero and there is still some of the downwards revaluation that needs to be accounted for then this will go through profit or loss.
Thanks
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