I am confused with working 6 from question ashanti from June 2010.
In working 6 from the examiner's answer it says:
there
will be a revaluation loss of $11·56m – $8m i.e. $3·56m. Of this amount $1·96m ($2·2m less $0·24m transfer for excess
depreciation) will be charged against revaluation surplus in reserves and $1·6 million will be charged to profi t or loss.
It says $1.96 will be charged against revaluation surplus in reserves but in the other comprehensive income workings it shows a positive $1.6 m against Revaluation adjustment
Other comprehensive income for the year, net of tax:
Available-for-sale fi nancial assets 20 9
Loss on bond now recognised 0·6 29·6
Gains on property revaluation 12 6 –
Revaluation adjustment (W6) 1·6 19·6
Actuarial losses on defi ned benefi t plan (14) – – (14)
Share of associate available-for-sale fi nancial assets (W3) 0·9 0·9
–––––– ––––– –––––––
Other comprehensive income for the year, net of tax 20·2 15·9 36·1
–––––– ––––– –––– –––––––
Total comprehensive income and expense for year 38·08 53·6 10 101·68
–––––––––––– –––––––––– –––––––– ––––––––––––––
I can not understand why same 1.6 is charged in the P/L and OCI & why 1.6 charged in the P/L is positive.
https://www.accaglobal.com/content/dam/acca/global/PDF-students/2012/p2int_2010_jun_q.pdf
https://www.accaglobal.com/content/dam/acca/global/PDF-students/2012/p2int_2010_jun_a.pdf
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SBRQuestion Ashanti
I found the answer, it is in the question para 6:
The
whole of the revaluation loss had been posted to the statement of comprehensive income and depreciation has
been charged for the year. It is Ashanti’s company policy to make all necessary transfers for excess depreciation
following revaluation.
which means the whole revaluation loss of $3.56 has been charged to OCI instead of $1.96, So $1.6 should be added back .
I have another question from Question Ashanti.
In paragraph 6 of question it's written:
Ashanti owned a piece of property, plant and equipment (PPE) which cost $12 million and was purchased on
1 May 2008. It is being depreciated over 10 years on the straight-line basis with zero residual value. On
30 April 2009, it was revalued to $13 million and on 30 April 2010, the PPE was revalued to $8 million. The
whole of the revaluation loss had been posted to the statement of comprehensive income and depreciation has
been charged for the year. It is Ashanti’s company policy to make all necessary transfers for excess depreciation
following revaluation.
In the answer
Working 6
At 30 April 2009, a revaluation gain of ($13m – $12m – depreciation $1·2m) $2·2 million would be recorded in equity for
the PPE. At 30 April 2010, the carrying value of the PPE would be $13m – depreciation of $1·44m i.e. $11·56m. Thus there
will be a revaluation loss of $11·56m – $8m i.e. $3·56m. Of this amount $1·96m ($2·2m less $0·24m transfer for excess
depreciation) will be charged against revaluation surplus in reserves and $1·6 million will be charged to profi t or loss.
There is a depreciation of $1.44m. My question is that why the depreciation of $1.44m is not charged to P/L.
The question says: "The whole of the revaluation loss had been posted to the statement of comprehensive income and depreciation has been charged for the year."
You are only doing correction entries. Depreciation is already charged to P&L, so you don't have to touch it anymore.
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