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Hello sir, I have a query.
At 30 April 20X6, Mixtures had recognised a revaluation gain of $30,000 in respect of one of its properties. In the year to 30 April 20X7, the value of another of its properties fell by $45,000, due to the announcement of a plan to build a new road. The second property had not previously been revalued.
How are Mixture’s profit for the year and the revaluation surplus as at 30 April 20X7 affected by these valuations?
Answer:
Profit or loss: : Reduced by $45,000
Revaluation surplus : Not affectedI dont understand how revaluation loss is affecting the P&L. I thought only OCI was affected by gains and losses in revaluation.
Where did you find this question (because strictly it is Paper FR and not Paper FA)?
The $45,000 is treated the same way as is depreciation – the value of the asset is being reduced and is an expense in the SOPL.
Revaluations upwards are unrealised profits and do not appear in the SOPL because the profit has not been realised, but are shown in the Statement of Comprehensive Income.
Oh okay, thankyou. btw i found this in acca hub IAS 16 questions for FA, could be a mistake on their part though.
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