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IAS 16 PPE (Revaluation model)

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › IAS 16 PPE (Revaluation model)

  • This topic has 3 replies, 3 voices, and was last updated 7 years ago by MikeLittle.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • October 25, 2015 at 3:22 pm #278873
    ammardar
    Member
    • Topics: 16
    • Replies: 51
    • ☆☆

    Hi (Sir Mike little),
    Sir my question is that till what time re supposed to transfer additional depreciation from revaluation reserve to retained earning…i read from somewhere that we re suppose to make transfer from revaluation reserve to retained earning till remaining life of asset,is it right?..if yes then will we continue to make (old) transfer from r reserve to r earning if asset again get revalue(either upward or downward) during its remaining life ??

    Eg Assets have total life of 5 years and asset gets upward revalue in year 2, then re we supposed to transfer additional dep. from r reserve to retained earning for the rest of three years ? ..if yes then what if asset again get Upward revalue in year 4, will we continue to make old transfer of additional dep (with respect to revaluation in year 2) from r reserve to retained earning in year 4,5 as well, along with new transfer of additional depreciation from r reserve to retained earning (wid respect to upward revaluation in year 4) ??
    i am writing here for the first time kindly help me out .
    Much regards.

    October 25, 2015 at 3:49 pm #278878
    Stefano
    Member
    • Topics: 23
    • Replies: 28
    • ☆☆

    Popping in because I’m interested in the answer
    Thanks

    October 25, 2015 at 5:04 pm #278888
    MikeLittle
    Keymaster
    • Topics: 26
    • Replies: 22699
    • ☆☆☆☆☆

    I’ve answered this! Where’s my answer gone?

    I’ll be back – watching the rugby semi-final second half

    October 25, 2015 at 6:10 pm #278896
    MikeLittle
    Keymaster
    • Topics: 26
    • Replies: 22699
    • ☆☆☆☆☆

    I’m going to change your question a little bit

    Asset cost $500,000 at start of year 1, 10 year estimated useful life

    At end year 3, carrying value 350,000 it’s revalued to 560,000, so 210,000 goes to revaluation reserve

    Year 4, 80,000 depreciation, carrying value 480,000, transfer from revaluation reserve to retained earnings 30,000, revaluation reserve now 180,000 (This transfer is recommended – it’s not a requirement!)

    Years 5, and 6 same again 160,000 depreciation (total for 2 years) carrying value 320,000, transfer 60,000 (for 2 years) from revaluation reserve to retained earnings, revaluation reserve now 120,000

    End year 6, revalue again to 400,000, revaluation reserve now 200,000

    Year 7, 100,000 depreciation carrying value 300,000, transfer 50,000 from revaluation reserve to retained earnings, revaluation reserve now 150,000

    Year 8, 100,000 depreciation carrying value 200,000, transfer 50,000 from revaluation reserve to retained earnings, revaluation reserve now 100,000

    Year 9, 100,000 depreciation carrying value 100,000, transfer 50,000 from revaluation reserve to retained earnings, revaluation reserve now 50,000

    Year 10, 100,000 depreciation carrying value zero, transfer 50,000 from revaluation reserve to retained earnings, revaluation reserve now zero

    OK?

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