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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.Basically, yes.
Instead of thinking in terms of the additional depreciation necessitated by the revaluation, consider it as the amortisation of the revaluation reserve. And if the asset gets revalued a second time, then the balance in the revaluation reserve will represent 1 year’s worth of additional depreciation from the first revaluation and the revaluation increase from the second revaluation
I’m going to change your example now and say that, at the date of second revaluation we re-assess expected useful remaining life to be 3 more years (7 in total)
That balance in revaluation will now be amortised over those three more years.
OK, 150,000 revaluation at end year 2.
End year 3, Dr revaluation reserve and credit retained earnings 50,000
End year 4, Dr revaluation reserve and credit retained earnings 50,000 AND revalue by another 40,000 AND revise useful life estimate to 3 more years (7 in total)
End year 5, Dr revaluation reserve and credit retained earnings 30,000
End year 6, Dr revaluation reserve and credit retained earnings 30,000
End year 7, Dr revaluation reserve and credit retained earnings 30,000By the way, it isn’t a requirement to make this transfer – it’s merely a recommendation
OK?
Well i understood most part of it but i want to knw that ydidnt u amortized 40000 revaluation amount in year 4 given the fact that a revaluation of 40000 also took place in same year ..is it bcz of the fact that amortozation takes place after one year nd this 40000 amount will b amortized in year 5 as it came on year 4 ? Plus kindly guide me if i dont do this working in real life then will i go against ias 16 ?
“ydidnt u amortized 40000 revaluation amount in year 4 given the fact that a revaluation of 40000 also took place in same year” – it didn’t say it, but was intended to, that the revaluation took place at the end of year 4
“if i dont do this working in real life then will i go against ias 16” – no – it’s a voluntary transfer – I pointed that out in my earlier post
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