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Revaluation of Non-Tangible assets

Forums › ACCA Forums › ACCA FR Financial Reporting Forums › Revaluation of Non-Tangible assets

  • This topic has 5 replies, 2 voices, and was last updated 1 year ago by mrjonbain.
Viewing 6 posts - 1 through 6 (of 6 total)
  • Author
    Posts
  • October 17, 2021 at 6:20 pm #637942
    VijayVittal
    Member
    • Topics: 2
    • Replies: 2
    • ☆

    I have a doubt about the revaluation of Non-Tangible assets. When an asset is revalued (at the beginning of the year), the previous depreciation is closed out. When the asset is revalued Is the new depreciation is calculated from the year of purchase till the Useful life or from the Year of revaluation to the useful life?

    October 17, 2021 at 7:37 pm #637948
    mrjonbain
    Moderator
    • Topics: 1
    • Replies: 1576
    • ☆☆☆☆☆

    In the case of intangible assets, these are generally carried at cost less amortisation if they are determined to have a finite life. They are also subject to test of impairment. In the case of intangibles of indefinite life these are held at cost and subject to tests of impairment on an annual basis.Only in very rare cases where their is an active market in the specific type of asset in question can they be held at fair value. Hope this helps. Feel free to ask if I haven’t adequately addressed your question.

    October 18, 2021 at 3:26 am #638083
    VijayVittal
    Member
    • Topics: 2
    • Replies: 2
    • ☆

    My question specifically was regarding the Revaluation of Intangible Assets, when companies choose to apply revaluation to a class of Asset. The Company revalues the cost of the asset in sufficient regularity, my doubt was in one of the videos posted by open Tuition YouTube Channel. Where the Instructor after revealing the asset, only depreciates the asset for the revalued year. But, in one of my workbooks, after a revolution is made the depreciation is made from the year of purchase to the year of revaluation.

    Ex:

    Machine A : 10,000 CU
    Purchased 20X0
    No revolution till 20X2
    Useful Life = 10 Years
    Residual Value = 0

    Depricitaion till 20X2 = 10,000/10 = 1000 * 2 = 2000
    = 10,000-2000
    Carrying Value @ YE 20X2 = 8000

    @ YE 20X3 Revaluation was made as the fair value of the asset increased to 12000 CU.

    Now @ YE 20X3 :
    Is it A) Depreciation from the Year 20X3 after the revaluation: 12,000/8 = 1500
    or Is it B) Depreciation from the Year 20X3 after the revaluation: 12,000/8*4 = 6,000 (4 is the year or uasge so far, from 20X0 till 20X3.

    October 18, 2021 at 4:33 am #638096
    mrjonbain
    Moderator
    • Topics: 1
    • Replies: 1576
    • ☆☆☆☆☆

    As I indicated in previous response, depreciation does not apply to intangible assets. Only a very select class of intangibles are held at fair value- ones in which there is an active market. Since patents, copyright assets and similar are unique, they can’t be valued with reference to an active market. I believe fishing quotas and taxi licences are given as examples of assets on which an active market may exist in the standard IAS38 intangible assets.
    If I were to answer your question with regard to tangible non-current assets then I believe the Opentuition way or option A version would be correct way of depreciating asset.Depreciate from time of revaluation at revalued amount, in a way that is in line with depreciation policy. Hope this helps. Feel free to ask if I haven’t adequately addressed your question.

    October 18, 2021 at 5:50 pm #638335
    VijayVittal
    Member
    • Topics: 2
    • Replies: 2
    • ☆

    Thanks that helped.

    October 18, 2021 at 7:08 pm #638355
    mrjonbain
    Moderator
    • Topics: 1
    • Replies: 1576
    • ☆☆☆☆☆

    You are welcome.

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