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Jay has purchased a PPE on 1 June 20×5 for 28million euro, with an estimated useful life of 5 years. At 31 May 20×6, the PPE had a fair value of 24million euro. The company uses revaluation model as per IAS 16 in the accounting for PPE.
Exchange rate on:
1 June 20×5 euro to pounds = 1.4
31 May 20×6 euro to pounds = 1.3
Dear Sir, may i know how should I treat this particular transaction in the financial statement of Jay as of 31 May 20×6?
Also please do advise me on the following workings:
On initial recognition $m $m
Cr. Bank 20.00
At the year ended $m Rate Euro’m
Balance b/d 20.00 1.4 28.00
Depreciation (4.00) 1.4 (5.60)
Historical carrying amount 16.00 22.40
Revalued Amount (31 May 20×6) 18.46 1.3 24.00
Increase in value (18.46-16) 2.46
Breakdown of the increase in value:
Due to rise in fair value (24-22.4)/1.4 1.14
Due to foreign exchange movement (24/1.3)-(24/1.4) 1.32
Total amount to be credited into OCI 2.46
(included within revaluation reserves, no need
Purchase – exchange rate at transaction date
SFP date – if revalued, use exchange rate at date of valuation
XD to OCI (assuming revaluation is upwards)