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Hi sir,
In q they didnt mention that they made a transfer.
But in examiner answer they mention “its assumed that company will transfer an amount from revaluation surplus to re”
Depending on what this assumption?
Hi,
This assumption always holds as it is advisable to do so from the shareholders perspective. If we are charging more depreciation as a result of the revaluation upwards and therefore reducing the distributable profits then it is only fair that we make the reserve transfer to adjust the retained earnings to where they’d have been before the revaluation.
Thanks
My understanding is that transfer of excess depreciation is an accounting policy and should only be done if the question states so. The technical article below from the ACCA F7 page refers. May you clarify further. Thank you.
Hi,
Yes, this is P2 and not F7, and in past questions the transfer is done even though it hasn’t been stated in the question. The reason being is that it is in the best interest of the shareholders to do so,
Thanks
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