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Hello sir ,
plz tell me what is the difference between IMPAIRMENT and REVALUATION LOSS with examples ?………. plz plz plz ……….. thanks in advance ……Hmm! Impairment is where we have an asset where there are indications that its carrying value may be in excess of its recoverable amount.
In that situation, the directors of a company need to determine the recoverable amount (the higher of value in use and net selling price). If carrying value is greater, then we need to impair down to recoverable amount.
Revaluation loss tends to be where the company revalues its assets each year and, this year, the revalued amount is lower than revalued carrying amount brought forward less this year’s depreciation on that brought forward figure.
If there is a loss, this would normally be debited to the previously revalued surpluses as shown in the Revaluation Reserve.
If this year’s revaluation loss is greater than the previously recognised revaluation surpluses in the Revaluation Reserve, then the excess loss will be debited to the Statement of Income.
Impairment is something which MUST be done where there are indications that an asset is impaired.
Revaluations tend to be because the company has adopted the fair value model of accounting for its assets but it is not a requirement in other circumstances
Hi Mike,
I dig out this thread and trying to solve the problem myself when I study past paper Q 1 Robby – June 2012, time iv, Robby purchased PPE for $10 m on 1 June 2009. I notice to 31 May 2012, new deprn is $0.61, old deprn is $0.5, excess deprn 0.61-0.5=0.11 realized out of revaluation surplus $11-$9=$2 to R.E., then remaining $2-$0.11=$1.89 realized to OCI in IS, but total impairment loss is $2.59, so $2.59-$1.89=$0.7 charged to R.E. as a loss. But in PPE calculation, why total $2.59 deducted, what I am thinking is just $0.7 needed to be deducted, coz there is $2 revaluation surplus to release the excess dreprn ($0.11) and some part of impairment loss ($0.89)?
Can you give double entry to all of them.
Many thanks,
Qin
Hi Mike, Sorry, Robby is P2 question, I didn’t realize I follow up in F7’s forum.
One more confusing point on Robby,
in the answer sheet of OCE part, profit on revaluation of investment in Hail to be deducted $5m, why? In the question paper, item (i), I notice purchase of Hail is cash $50m, investment in Hail is $55m, Robby has treated invstm in H at FVTOCI, what does it mean? if this “gain”on fv change 55-50=5, should not be recognized in OCE, where should it be?
Thanks,
QinHi Mike,
When you see above two posts, pls ignore it, I have transferred my question to P2 forum, pls answer in P2 Forum.
Thanks,
Qin
Impairment = carrying amount (that is revalue/cost model) > Recoverable amount (that is higher of fair value or value in use)
No-Impairment = carrying amount (that is revalue/cost model) < Recoverable amount(that is higher of fair value or value in use)
I’m not honestly sure why you have posted this ???
Is this relevant or are you just practising … or is it a question that you would like me to answer?
Sir,
i was stuck in revaluation/impairment/recoverable amount/carrying amount. then some finding from web i concluded myself for my own ease to use and to understand the impact of impairment. i concluded this formula for deciding to use impairment or not
Pleae correctme if i am not formalated this corretly to impairment decision
Impairment = carrying amount (that is revalue/cost model) > Recoverable amount (that is higher of fair value or value in use)
No-Impairment = carrying amount (that is revalue/cost model) < Recoverable amount(that is higher of fair value or value in use)
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