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hi sir ,
A company statement of profit & loss for the year ended 31 march 2015 sho wthe profit fpr the year of 575000. during the year an ordinary dividend 13000 was paid , and land costing 600 was revalue to 640000 .
what was the total comprehensive income for the year ?
A. 615000
B 575000ans is A . not B y ? unrealized revaluation should be include in statement comprehensive income & revaluation reserve ?
sir can u explain more about that ?
example
1) if we sold assets gain on revaluation – statement on comprehensive & statement on change in equity
2) if just a revaluation eg: revaluation on freehold 140000 to 150000
go in – comprehensive income n revaluation surplus account ??am i rite ? if not please explain thx a lot …
1. A gain on revaluation appears in the Statement of comprehensive income (as an extra line at the end of the Statement of profit or loss, and also appears as a revaluation reserve.
2. I don’t know what you mean by “if we sold assets gain on revaluation”. If you sell assets then the profit or loss on sale appears in the Statement of profit or loss.
hi sir ,
my meaning is when i disposal an assets with a revaluation from previous year . my revaluation surplus will close the double entry and go to retained earning .?? am i rite
2) for ur answer 1) u mean appear in revaluation reserve as well . if question ask will be change in statement change in equity ? yes or no ?
1. If a revalued asset is disposed of, then the balance on the revaluation reserve will be transferred to retained earnings.
2. The gain on revaluation goes to the revaluation reserve, and the movement on the reserve appears in the Statement of changes in equity,
Hi
I was wandering if there is any explanation/reasoning of the IAS 16 rule according to which revaluation reserve is transferred to retained earnings directly in equity rather than through income statement?
I was thinking of the following case:
Revalued asset with revaluation reserve in equity is sold and there is loss on disposal booked in P&L. The amount of loss on disposal is lower than revaluation reserve. The revaluation reserve is transferred from retained earnings to equity directly without influencing the P&L.
Effectively there is gain on sale of this asset when taking into account revaluation reserve, however loss is shown in P&L… I understand the treatment, however a bit confused about the logic here…
Any thoughts?
Thanks a lot
The balance on the revaluation reserve is there simply because we had revalued the asset (and is nothing to do with the actual sale – it is completely separate from any profit or loss on the disposal).
The only reason it is kept in a separate reserve is because it is not distributable as dividend. It is owed to shareholders (which is why it is reserves) but is not payable as dividend because it has not been realised.
Once the asset has been sold, then there is no longer any need to keep it separate – it is now distributable and so is transferred to retained earnings and can be paid as dividend.
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