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please help me to learn following
in IAS 12 a long example ( sorry i dont know the example number) says that
“in 19×6 the entity transferred 1033 from revaluation reserve to retained earnings. this represents the difference of 1590 between the actual depreciation on building (3250) and equivalent depreciation based on the cost of the building (1660 which is the book value at 01-01-19×6 of 33200 divided by the remaining useful life of 20 years) less the related deferred tax of 557.It’s releasing the “excess depreciation” which is being charged on the revaluation surplus. It’s not a requirement, but is seen as “good practice”
Why should retained earnings “suffer” the surplus depreciation based on a revaluation increase? This release of 1590 is the recycling of the element of revaluation back into retained earnings and effectively brings the annual charge for depreciation back down to what it would have been if no revaluation had taken place
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