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HI,frnds
let an asset having a carrying amount of 10 m was revalued to 20 m
and in the next year it is classified as held for sale and valued at 15 m but the CV IS 19 m
then how will be the treatment in SFP and IS
please answerIn the current year the assets is revalued, in SOFP it will be stated at [Revalued amount(-)depreciation(-)impairment (if any)] with a subsequent increase in the equity (Revaluation reserve) and the revised depreciation will be charged in SOCI.
Under IFRS 5, an asset is classify as held for sale if its CV will b recovered principally thru a sale transaction rather than its continuing use and have to meet all the criteria.
An asset held for sale should not be depreciated, therefore no depreciation charged to SOCI, but any gains/losses thru its sale will be reflected in SOCI in the year of sale, and in SOFP it should b measured at the lower of its CV and FV(-)CTS.
Hope this answer helps. Pls correct me for any mistake as I’m studying for this paper as well.
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Answering off the cuff
Please note that all revaluation credits are to be carried under the heading Revaluation Surplus not revaluation reserves
End of Year 1 Non-Current Asset (“NCA”)Schedule
Revalued Amount $20m
Less: Carrying Value $10m
Revaluation Surplus (“Rev Sup”) $10MDr NCA $10m
Cr Rev Sup $10mStatement of Financial Position (extract)
Non-Current Asset
Property Plant And Equipment $20mEquity attributable to OWners of the entity
Revaluation Surplus $10mEnd of Year 2 Non-Current Asset (“NCA”)Schedule
Carrying Value $20m
Less: Depreciation for the year $1M
Carrying Value $19m
Fair Value ($15m)
Impairment Loss $4MRevaluation Surplus Realised on recognition of Depreciation
(20-10)m/20yr = $0.5mDr Rev Sup $0.5m
Cr Retained Earnings $0.5mImpairment Loss of $4m recognised in Revaluation Surplus
Dr Rev Sup $4m
Cr NCA $4mStatement of Financial Position (extract)
Non-Current Asset
Property Plant And Equipment (reclassified as NCA Held for sale)Current Asset
NCA Held for Sale $15mEquity Attributable to Owners of the Entity
Revaluation Surplus (10-4.0-0.5) $5.5m
Retained Earnings (“R.E.”) $XXm
Rev Sup Recognised in R.E. +$0.5mIncome Statement (extract)
Depreciation ($1m)
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