Impairment (specific asset)

Hi Chris,

Just finished and enjoyed watching your lecture on the individual asset impairment example. I have 2 questions please to confirm that I have the right understanding.

1) Is it correct to say that the accounting treatment of the impairment on a revalued asset, (whereby we reduce the available balance in the revaluation surplus prior to posting as an impairment expense to P/L), is the same as what we do for a revaluation loss on a revalued asset (where there is also a surplus balance).

If this is true, then what is the difference between revaluation loss and impairment on the non-current assets?

2) Is it correct to say that the transfer of excess depreciation from revaluation reserves to retained earnings is done on every subsequent years after the revaluation took place? ( i am asking because i thought the transfer is only done once on the first year after the revaluation took place)

If this is true, then what happens to this transfer of excess depreciation if there is a revaluation loss in one of the subsequent years?

For e.g. say if a PPE with cost of $100,000 with useful life of 10 years is revalued to $200,000 after 2 years. The depreciation expense is now $25,000 rather than the original $10,000 incurred in the first 2 years. The excess depreciation to transfer should be $15,000 per subsequent year until end of life.

However, say after the 4th year of life, there is revaluation decrease to $120,000 (so depreciation from the 5th year would be 120,000/5 remaining life = $24,000). As this ‘new’ depreciation expense is $1,000 less (compared to the 3rd & 4th year), but still $14,000 more than the original depreciation of $10,000, do we still continue to have a transfer to retained earnings of $14,000 every from then onwards?

Thank you so much in advance!

Regards,
Tim