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How do you treat accumulated depreciation after revaluation of an asset and how do you charge period depreciation charges thereafter?
2.How is depreciation calculated after recognition of an impairment loss ? what happens to accumulated depreciation previously calculated ?
Depreciation is forward-looking.
It is calculated by taking the new amount of the asset ( revalued or impaired)
and dividing by its remaining useful life.
With revaluation, we make an annual transfer
of the excess depreciation caused by revaluation
from the revaluation reserve to retained earnings.
This is done over the useful life and is calculated as follows:
Revaluation surplus/ rem useful lifeUnder IAS 16, you can use either grossed up method, or netted method. According to Wiley, the netted method is the most common method used (for buildings anyway), but the grossed up method is most preferred by users of accounts because they can guage the relative age of assets and, estimate the timing and amount that would be needed to replace those assets from the grossed up method, whilst the netted method doesn’t give the same scope.
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