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Why is the transfer of the amount equal to the increase in depreciation (resulting from a revaluation) from the revaluation surplus to retained earnings considered good practice?
Hi,
It is considered good practice as dividends can only be paid out of distributable profits, and the revaluation surplus is not distributable. By transferring the excess depreciation to the retained earnings it is increasing a distributable reserve and can allow a larger dividend to be paid.
Thanks
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Thank you.
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