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IMPAIRMENT

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › IMPAIRMENT

  • This topic has 1 reply, 2 voices, and was last updated 1 year ago by P2-D2.
Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • February 28, 2021 at 3:43 am #612044
    aunimadihah
    Member
    • Topics: 18
    • Replies: 18
    • ☆

    Hi sir, i would like to ask regarding revaluation loss and there is revaluation surplus in other component of equity in previous year.

    The question is

    You have been provided with the following information

    Cost of machine : 200 000
    Useful life : 5 years
    Date of purchased : 1 January 2016

    On 1 july 2017, the value of the machine has declined due to lower demand for the entity’s product. The Information with regards to the machine:

    Fv – cts 120 000
    Value in use 110 000

    You were told that the machine has a revaluation surplus of 10 000 in the other component of equity for the year ended 31 dec 2016

    Determine the amount shown in profit or loss for the year ended 31 dec 2017.

    With regards to this question, i have understand that the working to answer is as below

    Impairment: 120 000 – 140 000(200k -(200k / 5 x 1.5)) = 20 000

    Depreciation: 20k ( 6 months) + 17 143 ( 120k / 3.5 x 6/12) = 37143

    And the answer is 57 143.

    The problem is, i just got confused why does the Impairment of 20 000 did not set off from the previous revaluation surplus of 10 000? Which make the amount of impairment in sopl will be only 10 000 instead of 20 000?

    Because, my previous understanding is any impairment loss which previously revalued surplus can be set off and any excess will be taken to sopl as expenses.

    I hope you can help me in understanding this matter 🙁 thank you sir

    February 28, 2021 at 11:19 am #612106
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 6453
    • ☆☆☆☆☆

    Hi,

    I can only assume that the 10,000 help in the revaluation surplus does not relate to this specific piece of machinery. There is no information in the question that highlights that the machine has been revalued as all we are given is the original cost and useful life. You cannot use the revaluations surplus for any machine, it can only be for the specific machine being impaired.

    Thanks

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    Posts
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