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Hi Chris,
I have a couple of questions regarding revaluation.
1) When an Investment property that is held at cost model is switched to FV model where does the gain go? To the PnL or OCI?
2) When the Recoverable amount is “higher” than the carrying amount will there be a gain on the asset? I know when the Recoverable amount is less than the carrying amount there is an impairment loss but is there a gain when it’s other way around.
3)When a previously impaired asset the revalued amount is let say 16Mil and due to good market conditions let’s say the recoverable amount has increased to 20Mil but the carrying amount if there was no impairment initially would be 19Mil. What amount will the reversal of impairment loss be?
3Mil (19-16), 4Mil (20-16) or 0 (No reversal)Thanks in advance 🙂
Hi,
1) When the transfer is made the initial gain would go through OCI as per IAS 16, but I doubt that you would see this happen as if it is held at cost then it is unlikely to be an asset that appreciates in value. If it did then it would have been held under the revaluation model. Once then held at FV under IAS 40 then the gains/losses will go through profit or loss.
2) No, this is just saying that there is no impairment of the asset.
3) You cannot revalue it to higher than what it would have been held at if there was no original impairment, so we’d be looking at 3 million.
Thanks
Thank you so much Chris.
I also have another question I’m not sure if I can ask under the same topic but I’ll ask anyway
So at the FR exam we were asked this question in Sec A (It was a drag and drop Q)
A company which had paid 60000 for a staff training expense on 1 Sept 2018 which is for 5 years received a government grant of 60,000 and they have recorded the whole amount as other income for the year ended December 2018
The requirement was how the double entries should be for the adjustmentAccounts options were
Accured Expenses
Deferred income
Bank
Other incomeAmounts were
56000
4000
48000
12000(Amounts can be used more than once)
What is the correct double entry for this?
Would be great if you could help me with this too 🙂Hi,
Drag and drop? Didn’t think we had that type of question in FR.
The amount should be held as deferred income and released over the 5 year period (60 months). We can only recognise 4 months of the 60,000 as income, so it would be 56 months (60 – 4 months) that would be deferred. When you’ve calculated the number we then process the entyr to reduce the income and increase the deferred income.
Thanks
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