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Dear Chris,
I hope you are well and safe,
in regard to your lecture about IAS 40 I would like to ask you about the
Gain on revaluation of PPE $1500
Shall we close this amount to revaluation reserve account first then the retained earnings at the end of the year on 31.12.2015 through the following entries:Dr Gain on revaluation (OCI) $1500
Cr Revaluation Reserve (SFP) $1500
2nd J.V
Dr Revaluation Reserve (SFP) $1500
Cr Retained earnings (SFP) $1500Or we can close it directly to retained earnings account through the following entry:
Dr Gain on Revaluation (OCI) $1500
Cr Retained earnings (SFP) $1500
Could you tell me which one is correct ,please?Thank you in advance.
Hi,
No, the balance will stay in the revaluation reserve following the change in use. Any subsequent changes in value will then go through profit or loss, which then hit the retained earnings figure. the revaluation reserve remains untouched until the asset is eventually sold. It would then be removed and taken through retained earnings in the usual fashion as a reserve transfer.
Thanks
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