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If an asset that was being carried at revalued amount with revaluation reserve in equity is replaced with another asset and the transaction lacks commercial substance then the carrying amount would remain same…
BUT what about the revaluation reserve?? would it b closed in retained earnings or left as it is??What do you mean “the transaction lacks commercial substance”? Do you have a particular situation in mind?
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i mean there is neither an increase in the cash flow nor the value of the entity’s operation increases on account of the asset that is received on exchange..!
No particular situation.
I’m not sure that I understand your question but try this as a solution.
If an asset of similar value to the revalued disposed asset is received in exchange, is that not the equivalent of selling the revalued asset for its revalued amount. Thus, I suggest, the revaluation gain has been realised and, I imagine, the correct treatment would be to recognise that gain as having been realised.
So a transfer within Statement of Changes in Equity would seem to be appropriate Dr Reval Reserve and Cr Retained Earnings
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hmm ok Thankyou.. I was also thinking abt the same treatment..
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