IAS 16 – Transfer of excess depreciation on Revaluation

Hello sir..! Good day to you..!

If we were to adopt the optional transfer of EXCESS DEPRECIATION from Revaluation surplus to Retained Earnings, do we have to transfer the excess amount in each of the subsequent accounting period.

Or is it only done initially (ONE TIME) at the year of revaluation ?

The reason why I ask is related to a question from ACCA STUDY HUB – Chapter IAS 16 : Example 13

The question is as follows:

Hassan owns a business that operates a hotel. The business owns the hotel building, and on 31 December 20X2, its carrying amount based on cost is:

Hotel property (Cost) 500,000
Accumulated depreciation (112,500)
Carrying amount 387,500

The hotel building is depreciated on a straight-line basis over 40 years. The building has been depreciated for nine years. On 1 January 20X3, Hassan decided to revalue his hotel building. The hotel has a market value of $600,000 on that date.

Hassan has a policy of transferring excess depreciation to retained earnings.

So the excess depreciation would be:

Revised Depreciation = $600000 ÷ 31 years = $19,355

Original Depreciation = $500,000 ÷ 40 years = $12,500

The excess depreciation = $19,355 ? $12,500 = $6,855

The double entry to transfer the excess depreciation is:

DR Revaluation Surplus $6,855
CR Retained Earnings $6,855

The balance in Hassan’s revaluation surplus account is now = CR $212,500 + DR $6,855 = CR $205,645.

The question further continues and says that:

On 31 December 20X6, Hassan’s building was valued at $510,000.

SO MY ULTIMATE QUESTION IS WHETHER WE SHOULD TRANSFER THE EXCESS DEPRECIATION OF $6855 FROM REVALUATON SURPLUS TO RETAINED EARNINGS IN EACH OF THE YEARS FROM 20X3 TO 20X6, THUS REDUCING THE BALANCE IN REVALUATION SURPLUS TO :

[205645 – (6855*3)] AT 31 DEC 20X6