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Why is the revaluation reserve $25.4m?
See my workings below – where OCE is $27m
**01/01/2012**
Dr PPE (SFP) 80
Cr Bank (SFP) 80SFP 80
**31/12/2012**
Dr Dep (SPL) 4
Cr PPE (SFP) 4SFP 76
SPL -4**31/12/2013**
Dr Dep (SPL) 4
Cr PPE (SFP) 4SFP 72
SPL -4**31/12/2014**
Dr Dep (SPL) 4
Cr PPE (SFP) 4SFP 68
SPL -4**01/01/2015**
Dr PPE (SFP) 27
Cr REVAL (OCI) 27SFP PPE 95.00 & OCE 27
SOCI 27**31/12/2015**
Dr Dep (SPL) 5.59
Cr PPE (SFP) 5.59SFP PPE 89.41 & OCE 27
SPL -5.59Thanks in advance.
Perhaps the version you are looking at has made a reserve transfer for the extra depreciation – this is allowed but not required. I would stick with 27.
Really FR not SBR. Don’t use journals in this exam unless you are asked for them.
On further clarification please.
IAS 16 paragraph 41
“The revaluation surplus included in equity in respect of an item of property, plant and equipment may be transferred directly to retained earnings when the asset is derecognised. This may involve transferring the whole of the surplus when the asset is retired or disposed of. However, some of the surplus may be transferred as the asset is used by an entity. In such a case, the amount of the surplus transferred would be the difference between depreciation based on the revalued carrying amount of the asset and depreciation based on the asset’s original cost. Transfers from revaluation surplus to retained earnings are not made through profit or loss.”Based on this, would I be correct is stating that the OCE (SFP) would be reduced by $1.59m and RE (SFP) would be increased by $1.59m?
Therefore:
**31/12/2015**
SFP
PPE 89.41RE (X + 1.59) where X is other retained earnings
OCE 25.41Thanks again for you advice.
Reduce by the difference between the depreciation on the revalued amount and the depreciation that would originally have been charged before the revaluation.
🙂
BUT don’t go batting on about reserve transfers too much in SBR – shareholders aren’t very interested
Me again!
IAS 16 – Revaluation decrease
What happens if Panama does not elect (as is allowed per IAS 16 paragraph 41) to transfer the surplus of $0.55m?
Would this therefore be the situation?
SFP
– PPE 8.00
– OCE 0.15SPLOCI
– DEP (1.75)
– Reval. Loss / imp (4.25)Thanks.
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